1. During a recession, government revenues from the income tax fall and government transfers rise as the reduction in income and the rise in unemployment raise the number of people who qualify for benets. (a) Demonstrate the effect of this change in the budget decit to the following. (i) demand or supply for loanable funds (ii) equilibrium values of the interest rate (iii) equilibrium quantity of loanable funds (iv) net capital outow (4 marks) (b) Based on your answer in a), discuss the effect to the net capital outflow. (2 marks)