Question: For each interest rate below, compute the opportunity cost (in terms of forgone spending next year) to a household of spending $1000 this year: a.

For each interest rate below, compute the opportunity cost (in terms of forgone spending next year) to a household of spending $1000 this year:
a. The interest rate is 5 percent per year.
b. The interest rate is 7 percent per year.
c. The interest rate is 9 percent per year.
d. Explain why, other things being equal, households save more when the interest rate is higher.

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