Question 1
Higher interest rates are likely to
◦ have no effect on consumer spending or saving.
◦ decrease consumer spending and increase consumer saving.
◦ decrease both consumer spending and consumer saving.
◦ increase consumer spending and decrease consumer saving.
Question 2
Consumption is
◦ positively related to household income and wealth and households' expectations about the future, but negatively related to interest rates.
◦ negatively related to household income and wealth, interest rates, and households' expectations about the future.
◦ determined only by income.
◦ positively related to household income and wealth, interest rates, and households' expectations about the future.