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Question 1 (35 points) In the intertemporal model with investment, suppose there is a shift in the representative consumer's preferences: namely, the consumer prefers, given
Question 1 (35 points) In the intertemporal model with investment, suppose there is a shift in the representative consumer's preferences: namely, the consumer prefers, given the market real interest rate, to consume less current leisure and more current consumption goods. (a) Using diagrams, determine the effects of this on the equilibrium current aggregate output, employment, real wage, real interest rate, consumption, and investment. (Assuming that the shift in the output demand curve is larger than the shift in the output supply curve) (b) Explain the reason for each shift in the diagrams
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