Some economists argue as follows: Suppose that Y=Y* currently. An increased rate of saving from income (a...

Some economists argue as follows:

Suppose that Y=Y* currently. An increased rate of saving from income (a lower rate of consumption) reduces interest rates by raising the supply of savings that can be borrowed. Investors borrow the extra savings, and investment rises to replace the decline in consumption. Y remains at Y*.

Evaluate this argument. [Limit 80 words: 4 marks]

Answer:

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Rahul Sunny answered 1 year ago

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