Home /
Expert Answers /
Economics /
1-if-a-consumer-in-the-two-period-credit-market-model-is-initially-a-lender-and-the-real-interest-pa984
(Solved): 1. If a consumer in the two-period credit market model is initially a lender, and the real interest ...
1. If a consumer in the two-period credit market model is initially a lender, and the real interest rate falls, determine what the consumer does in response. Assume that the income effect of the interest rate change is greater than the substitution effect.
Expert Answer
If the real interest rate falls, the consumer will likely respond by increasing thei