Figure 21-29
The figure below illustrates the preferences of a representative consumer, Nathaniel.
-Refer to Figure 21-29. A change in Nathaniel's optimum from point A to point B results from
A)a change in Nathaniel's preferences.
B)an increase in the income Nathaniel receives when he is young.
C)an increase in the interest rate.
D)a decrease in the interest rate.

Question

Figure 21-29
The figure below illustrates the preferences of a representative consumer, Nathaniel. 
-Refer to Figure 21-29. A change in Nathaniel's optimum from point A to point B results from
A)a change in Nathaniel's preferences. 
B)an increase in the income Nathaniel receives when he is young. 
C)an increase in the interest rate. 
D)a decrease in the interest rate.

Quizplus · Accepted Answer

A change in Nathaniel's optimum from point A to point B due to an increase in the interest rate would lead to a change in the consumption-savings decision, as higher interest rates make saving more attractive, shifting the optimum point.

Figure 21-29 The Figure Below Illustrates the Preferences of a Representative Consumer