If interest rates on consumer loans rise,the
A) consumption function will shift downward.
B) saving function will shift downward.
C) consumption and saving functions will not change, but the amounts consumed and saved will decline.
D) marginal propensity to consume will rise.
E) marginal propensity to save will rise.

Question

Quizplus · Accepted Answer

If interest rates on consumer loans rise, the cost of borrowing money increases, which means that consumers will be less likely to spend money on goods and services. This results in a downward shift of the consumption function, as consumers will be consuming less overall.

If Interest Rates on Consumer Loans Rise,the