PPoE 4 Consider a closed economy Use saving and investment d

PPoE 4) Consider a closed economy: Use saving and investment diagram and appropriate formula to explain the following statement \"a rise in autonomous consumption causes saving and investment to fall and the real interest rate to rise in the long run, while a fall in autonomous consumption causes saving and invest ment to rise and the real interest rate to fall\" s Tmoeand Inflation

Solution

autonomous consumptionmenas the minmum amount for consumption that is the consumption for necesities

when people osent have income but autonomous consumption take place. and it is considerd as dissaving that is why the saving increSE IN LONG RUN