Answered

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4. A consumer, who is initially a borrower, remains a borrower even after a decline in
interest rates. Is this consumer better off or worse off after the change in interest rates?
If the consumer becomes a lender after the change, is he better off or worse off?
5. A risk-averse individual is offered a choice between a gamble that pays $2000 with a

Sagot :

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Final answer:

Interest rate changes impact consumers' borrowing and lending decisions, risk aversion influences choices, and interest rates affect consumption patterns.


Explanation:

Interest rates play a crucial role in the borrowing and lending decisions of consumers. When interest rates decline, a consumer who remains a borrower may be better off as they can borrow at a lower cost. If the consumer becomes a lender after the interest rate change, they may also be better off as they can earn more on their savings.

For a risk-averse individual, the choice between a certain amount of money and a gamble depends on their attitude towards risk. If the individual values certainty and security more, they may prefer the certain amount over the gamble that offers a potentially higher payoff.

Consumers may respond to changes in interest rates by adjusting their consumption patterns. Lower interest rates can lead to increased borrowing for big-ticket items like cars, stimulating consumption and economic activity.


Learn more about Effects of Interest Rates on Consumers here:

https://brainly.com/question/40600641


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