Answer to Question #215827 in Economics for akky

Question

A decrease in the real interest (please answer correctly with explanation)

A.

decreases savings for​ borrowers, but has an uncertain effect on the savings of lenders.

B.

has an uncertain effect on the savings of both borrowers and lenders.

C.

increases savings for​ borrowers, and decreases the savings of lenders.

D.

increases savings for​ lenders, but has an uncertain effect on the savings of borrowers.

E.

reduces savings for both borrowers and lenders.

Answer 1

A decrease in real interest reduces the savings of both borrowers and lenders, as there is a general decrease, which leads to a decrease in all types of savings.

E.

reduces savings for both borrowers and lenders.