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According to the Fisher model, what are the key determinants of the real rate of interest? Suppose that the average rate of time preference among
According to the Fisher model, what are the key determinants of the real rate of interest?
Suppose that the average rate of time preference among economic units DECREASES (i.e. increased preference for future consumption).
Use the Fisher model to illustrate how this change would affect the investment/production/consumption decision made by an economic unit who is already operating as a DSU.
What would happen to the amount of desired borrowing?
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