Suppose that people in France decide to permanently increase their savings rate. Predict what will happen to the French bond market in the future. Can France expect higher or lower domestic interest rates?
A. There will be an increase in wealth, creating a shift to the right in the demand curve for bonds in France. France can therefore expect permanent higher interest rates in the future.
B. There will be a decrease in wealth, creating a shift to the left in the demand curve for bonds in France. France can therefore expect permanent lower interest rates in the future.
C. There will be an increase in wealth, creating a shift to the right in the demand curve for bonds in France. France can therefore expect permanent lower interest rates in the future.
D. There will be a decrease in wealth, creating a shift to the left in the demand curve for bonds in France. France can therefore expect permanent higher interest rates in the future.
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