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Consumption being a function of income

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Reference no: EM131273794

In addition to consumption being a function of income, suppose that it is also a function of interest rates. Now, lower interest rates make borrowing to consume easier, encouraging overall consumption.

How would such a change impact the shape of the IS and LM curves? AD curve?

How would such a change impact the effectiveness of monetary and fiscal policy?

Reference no: EM131273794

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