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An increase in the real interest rate makes current

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Reference no: EM13314683

1. "An increase in the real interest rate makes current consumption relatively cheaper than future consumption"

a. "The Keynesian consumption function, which implies that agents consume a constant fraction of their income, does not match short run household data"

b."If an agent is liquidity constrained, then an unexpected increase in transitory income of $100 can result in the agentís current consumption increasing by $100"

Reference no: EM13314683

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