Consumption of an increase in the interest rate

Reference no: EM13691180

Using the standard 2 periods model with period 1 on the x axis and period 2 on the y axis answer the following questions. The household has period 1 income of y, period 2 income of y’ and faces a market interest rate of r.

Show the effects on period 2 consumption of an increase in the interest rate. Explain.

Reference no: EM13691180

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