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Use a saving-investment diagram to explain what happens to saving, investment, and the real interest rate in each of the following scenarios in a closed
Use a saving-investment diagram to explain what happens to saving, investment, and the real interest rate in each of the following scenarios in a closed economy.
(a) Current output rises due to a temporary productivity increase.
(b) The government increases spending temporarily for a one-year project to turn mercury into gold.
(c) The average educational level rises, inducing an increase in the future marginal productivity of capital.
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