[_] E. Because a fall in the real interest rate decreases the opportunity cost of investment [:] F. Because an increase in the interest rate leads households to reduce their current consumption E] G. Because a decrease in the interest rate leads households to reduce their current consumption. E] H. Because a rise In the real interest rate increases the opportunity cost of investment b. The market for nanoal capital is shown in the graph Suppose the government pursued a fiscal contraction by reducmg the level of government purchases Use the fine drawrng tool to draw a Single line to show the effect otthis change in scal policy. Properly label your line Carefully follow the instructions above, and only draw the required objects, What would happen to the eqwlibrium interes rate, the amount of investment in the economy, and the longerun growth rate in this situation? This would result in V in the equilibrium interest rate V in the amount of investment in the economy and V in the longerun growth rate. c. Now suppose the scal contraction occurs by increasing taxes. (Hint. An increase in taxes is likely to reduce disposable income and thus reduce aggregate consumption ) Suppose a shirtthe NS will occur due to change in level of taxes This would result in equilibrium interest rate V in the amount ofinvestment in the economy. and V in the longerun growth rate, V in the Real Interest Rate (i) FinanCial Capital ($3 NS 9n