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Explain How an Increase in the Level of Real Interest

question 104

Essay

Explain how an increase in the level of real interest rates in the rest of the world relative to the United States is likely to affect U.S. net exports.


Definitions:

APS

Stands for Average Propensity to Save, which measures the proportion of income that households save rather than spend on goods and services.

Autonomous Consumption

The level of consumption that occurs when income is zero, representing the consuming behavior independent of current income.

Aggregate Household

The combined and total measure of all consumers in an economy, accounting for all spending and consumption.

Disposable Income

The amount of money that individuals or households have available to spend or save after income taxes have been deducted.

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