(a) Use an appropriate diagram, to explain how the Permanent Income Theory of Consumption reconciles the results of cros

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(a) Use an appropriate diagram, to explain how the Permanent
Income Theory of Consumption reconciles the results of
cross-section and time series estimate of the Keynesian aggregate
consumption
function.

(15 marks)
(b) With the help of a diagram, explain the effect of an
increase in nominal income on interest rate.