For each interest rate below, compute the opportunity cost (in terms of forgone spending next year) to

Question:

For each interest rate below, compute the (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.
Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...