Effect of an increase in r

Effect of an increase in r can be decomposed into:

Substitution Effect –
Increase in r makes Cc more expensive comparef to Cf
- decrease in Cc and an increase in Cf.

Income Effect –
Consumer is better off in this instance since he is a saver
and hence a lender rather than a borrower and can
therefore go to a higher indifference curve. If Cc and
Cf are normal goods then there will be an increase in
both Cc and Cf.

Overall the increase in r - increase in Cf but we are not
quite sure about Cc as it depends on whether the
substitution or income effect is stronger.