Question
Using the two periods model of the current account presented in class, explain the effects of a decrease in the interest rate on consumption,
Using the two periods model of the current account presented in class, explain the effects of a decrease in the interest rate on consumption, trade balance, and the current account of each period. Consider both the case of a "borrower" and a "lender". Your graph should show both the income and the substitution effect. Please make sure to label the axes, endowment point, and consumption bundles. Missing labels will result in points losses.
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Principles Of Managerial Finance
Authors: Lawrence J. Gitman, Chad J. Zutter
13th Edition
9780132738729, 136119468, 132738724, 978-0136119463
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