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Consumers typically pay a higher real interest rate to borrow than they receive when they lend (by making bank deposits, for ex). Draw a consumer's budget line under the assumption that the real interest rate earned on funds lent, rL , is lower than the real interest rate paid to borrow, rB . Show how this consumer's budget line is affected by an increase in the initial wealth.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M939334

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