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Unformatted text preview: households earn more on all previous savings, so the income effect encourages households to save less. Substitution Effect When the interest rate rises, the relative price of present consumption rises, so the substitution effect encourages households to save more. Page 68...
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This note was uploaded on 12/29/2011 for the course ECO 311 taught by Professor Willis during the Fall '10 term at SUNY Stony Brook.
- Fall '10