Question $1$

$0\mathrm{.}5$ pts

Malcom comes from a wealthy family and finds that, in college, he can use his wealth to run a thriving loan business, lending to strapped college students. To make his loans appealing, he uses the federal funds rate$-$the low short$-$term interest rate that the Fed manipulates in making monetary policy$-$as his interest rate. When the Fed lowers the federal funds rate, Malcom, as a creditor, will his consumption somewhat, since for him, the of an interest rate change will dominate the effect.

decrease; income; substitution

increase; substitution; income

decrease; substitution; income

increase; income; substitution