Essay
Consider Figure 16.9 below, which shows household real income, consumption, and savings. Explain why you can see a rise in savings while both consumption and income fall in 2007-2009. Does this neoclassical model fully explain this behavior? What other effect might be influencing changes in these three macroeconomic variables?Figure 16.9: Real Household Disposable Income, Consumption, and Savings 
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First, the neoclassical model states tha...View Answer
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