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Economic 5. [Maximum of 500 words including references (if any) and footnotes (if any).] With respect to the consumption v. savings with incomesintwo periods model,

Economic

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5. [Maximum of 500 words including references (if any) and footnotes (if any).] With respect to the consumption v. savings with incomesintwo periods model, an increase in the interest rate leaves a lender better off and a borrower worse off. Discuss this statement using the appropriate diagram(s) and the concept of revealed preference if/when appropriate. (15 points)

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