<p>I recently wrote an economics quiz and one of the questions was: </p>

<blockquote>
  <p>Suppose "r" is the interest rate that prevails between the present and
  the future. If "r" increases and a household chooses to consume more
  in the present, then:</p>
</blockquote>

<p>I answered that since the price of current consumption increases and the consumer consumes more, current consumption must be an inferior good.</p>

<p>However this was marked incorrectly for me and the correct answer was current consumption must be a normal good. I'm unsure of why this would be the correct answer, could somebody explain the reasoning?</p>

<p>Edit: The five options were:</p>

<blockquote>
  <p>A) it is an irrational decision.</p>
  
  <p>B) consumption in the present must be an inferior good.</p>
  
  <p>C) consumption in the present must be a normal good.</p>
  
  <p>D) consumption in the future must be an inferior good.</p>
  
  <p>E) consumption in the future must be a normal good.</p>
</blockquote>

<p>I chose chose B but the correct answer was listed as C.</p>

CC BY-SA 4.0
2018-11-13T06:30:07.250Z
The options are added in the edit
pdid
<interest-rate>
If interest rate increases and consumption in the present increases, is present consumption a normal good?
pdid
# If interest rate increases and consumption in the present increases, is present consumption a normal good?

(Asked by: username_0 on 2018-11-13)

I recently wrote an economics quiz and one of the questions was:

> Suppose "r" is the interest rate that prevails between the present and
> the future. If "r" increases and a household chooses to consume more
> in the present, then:

I answered that since the price of current consumption increases and the consumer consumes more, current consumption must be an inferior good.

However this was marked incorrectly for me and the correct answer was current consumption must be a normal good. I'm unsure of why this would be the correct answer, could somebody explain the reasoning?

Edit: The five options were:

> A) it is an irrational decision.
>
> B) consumption in the present must be an inferior good.
>
> C) consumption in the present must be a normal good.
>
> D) consumption in the future must be an inferior good.
>
> E) consumption in the future must be a normal good.

I chose chose B but the correct answer was listed as C.

**Tags:** interest-rate
> **Comments:**
> **username_0**: The options are added in the edit  

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## 0 answers

