Question: In the figure in Solved Problem 16.4, suppose that the governments demand curve remains constant at D 1 g but the government starts to tax

In the figure in Solved Problem 16.4, suppose that the government’s demand curve remains constant at D¹_g but the government starts to tax private earnings, collecting 1% of all interest earnings. How does the capital market equilibrium change? What is the effect on private borrowers?

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