Question: om b. Show your answer for parts (a) & (b) in three diagrams (that depict the loanable funds market, the labour market, and the rental

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b. Show your answer for parts (a) & (b) in three diagrams (that depict the loanable funds market, the labour market, and the rental market for capital). Be sure to identify which points on your diagrams are the equilibriums for part (a) & (b) respectively. No written explanation is required. (4 points) C. Suppose the government finds the change in the long-run equilibrium level of investment in part (b) undesirable and wants to use government spending on goods & services to keep investment at its initial long-run equilibrium level (i.e., the one in part a). Can the government achieve this goal? If yes, find the level of government spending that could achieve this goal. What happens to the government budget balance? If no, explain why. (3 points) d. (Ignore part d) Suppose instead the government finds the change in the long-run equilibrium level of real interest rate in part (b) undesirable and wants to use government spending on goods & services to set it to 10%. Can the government achieve this goal? If yes, find the level of government spending that could achieve this goal. What happens to the government budget? If not, explain why. (3 points)Step by Step Solution
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