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Suppose that society decided to reduce consumption and increase investment.
a. How would this change affect economic growth, both in the short term and in the long term?
b. Would it matter what type of investment was undertaken?
c. What groups in society would benefit from this change? What groups might be hurt?
Suggest fiscal or monetary policies that can address this problem. Use the IS/LM/FE and/or the AD/AS models to derive the short-run and long-run effects.
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Assume that the society decided to reduce consumption also increase investment. Explain how would this change effect economic growth.
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