Interest rates, Substitution effect and income effect.
1)A saver will increase the amount she saves when she expects her future income to rise unless,
a) current consumption is a normal good.
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Order Paper Nowb) the IE dominates the SE.
c) the SE dominates the IE.
d) current consumption is an inferior good.
2)A borrower will increase the amount she borrows when she expects her future income to rise if,
a) current consumption is a normal good.
b) the IE dominates the SE.
c) the SE dominates the IE.
d) current consumption is an inferior good.
What are the answers?and explain the reasons to me, thx.
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