The discussion surrounding Exhibit suggests that when the government spends $1 wastefully, it does not matter (for determining the equilibrium interest rate) whether the government gets the $1 by taxation or by borrowing. Draw a similar diagram to show that the same conclusion holds when the government spends $1 productively; say by using it to purchase $1 worth of goods for TerryTaxpayer.

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Future Consumption $1.10 $1.00 Current Consumption