Make sure you draw two figures-one for the borrowers

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Consider the consumption-saving decision. Explain how does a decrease in the current income y affect the consumer's consumption-saving decision. In particular, explain:

1) How will current consumption c, future consumption c′, and savings s change;

2) Are there any substitution effect or income effect. Make sure you draw two figures, one for the borrowers and one for the lenders.

Reference no: EM132492264

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