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Use a saving-investment model to what will happens to saving, investment, and the real interest rate for each of the following scenarios in a closed

Use a saving-investment model to what will happens to saving, investment, and the

real interest rate for each of the following scenarios in a closed economy.

(i) In an agricultural economy, good weather in the current year promises a bumper

crop next year, leading citizens to expect higher income next year. (2 marks)

(ii) Government regulations with an effect of next year will reduce the marginal

product of capital. (2 marks)

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