• Card 7 / 8: How would a decrease in expected interest rates over one's working life affect one's intertemporal budget constraint? How would it affect one's consumption/saving decision?

    Answer:
    Lower interest rates would make lending cheaper and saving less rewarding. This would be reflected in a flatter intertemporal budget line, a rotation around the amount of current income. This would likely cause a decrease in saving and an increase in current consumption, though the results for any individual would depend on time preference.

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Microeconomics 06 Elasticity

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Attribution:  Microeconomics, OpenStax-CNX Web site. Download for free at http://cnx.org/content/col11613/latest
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