Solution for When real interest rates rise, consumption will shift: downward if income rises as well downward if there is saving O upward if the substitution…
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A real interest rate is one that has been adjusted for inflation, reflecting the real cost of funds to the borrower and the real yield to the lender.
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In this lesson summary review and remind yourself of the key terms and graphs related to aggregate demand (AD). Topics include the wealth effect, the interest rate effect, and the exchange rate effect, as well as the factors that shift AD.
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