A higher rate of return to saving has:
A. income and substitution effects that both decrease saving.
B. an income effect that discourages saving and a substitution effect that encourages saving.
C. income and substitution effects that both increase saving.
D. an income effect that encourages saving and a substitution effect that discourages saving.
Answer:B
A higher rate of return to saving has:
A. income and substitution effects that both decrease saving. B. an income effect that discourages saving and a substitution effect that encourages saving. C. income and substitution effects that both increase saving. D. an income effect that encourages saving and a substitution effect that discourages saving.