The interest rate on the intertemporal budget constraint

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Show the effect of a small increase in the interest rate on the intertemporal budget constraint. Assuming standard preferences for current and future consumption (as shown in Figure 11.4), what will be the effect of the increase in r on the savings rate and future consumption? Show it on the graph with present consumption on the horizontal axis and future consumption on the vertical axis.

Reference no: EM131173147

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