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1. Given the experience of pandemic, households become permanently cautious and reduce their marginal propensity to consume. Explain carefully the effect of this change: a.

1. Given the experience of pandemic, households become permanently cautious and reduce their marginal propensity to consume.

Explain carefully the effect of this change:

a. on consumption. (3 marks)

b. on the market for loanable funds. (7 marks)

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