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Loanable fund market diagram

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Analyse the effects of the following events using the loanable fund market diagram where we have (real) interest rate on the vertical axis and the quantity of loanable fund on the horizontal axis. Please ensure to explain what happens to saving, investment and (real) interest rate.

a) Consumers decide to save more to prepare themselves for the future (at any given interest rate). Assume the government budget balance is zero.

b) A reduction of income tax rate by noting that the source of the supply of loanable funds coming from both private as well as public saving.

Please show me how should the graph be drawn for question a) and b).

Reference no: EM131476091

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