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Suppose the government suddenly raised taxes but consumers did not change spending amounts and instead dipped into savings.

Then, ceteris paribus, which of the following outcomes is most likely?

A

Real interest rates fall, quantity of loans increase.

B

Real interest rates rise, quantity of loans increase.

C

Real interest rates rise, quantity of loans decrease.

D

Real interest rates fall; quantity of loans decrease.

E

Stasis: No shift of either curve; just a quantity change.

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