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a) Given these series, what must be true about the proportionate declines in consumption (C) and income (Y) during recessions? b) Use the two-period Fisher
a) Given these series, what must be true about the proportionate declines in consumption (C) and income (Y) during recessions?
b) Use the two-period Fisher model to explain and illustrate the impact of a temporary decline in income (Y1 falls but Y2 does not) on a typical consumer who does not save or borrow initially.Relate this to what you saw in the graphs above.Explain the role that diminishing marginal utility plays in producing this consumption smoothing result.
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