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Suppose the government reduces the level of government purchases, G↓. Explain in detail, using words/symbols, what...

  1. Suppose the government reduces the level of government purchases, G↓. Explain in detail, using words/symbols, what will happen to:

the real interest rate, private and public savings, national savings, investments, and consumption.

Show graphically the effects on the savings and investment market. Assume the MPC < 1.

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