Analyze, using the IS-LM model, the macroeconomic effects of an increase in savings in the short term and its implications for long-term growth. Specifically, suppose that households (consumers) lose confidence and start saving more for any level of disposable income. Please answer the following question (using graphs where possible): Does the attempt to save more necessarily lead to increased savings or will it lead to a decrease in savings and why?

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Q: analyze, using the IS-LM model, the macroeconomic effects of an increase in savings in the short…

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