1. In each of the following cases, draw a graph showing an increase or decrease in equilibrium interest rates. a. Suppose the demand for loanable funds remains unchanged. Will the equilibrium interest rates increase or decrease if there is an economic expansion? ( 3 points) b. Suppose the supply of loanable funds remains unchanged. Will the equilibrium interest rates increase or decrease if the nonprice conditions become more restrictive? (3 points) 2. Suppose the 10-year T-bonds are currently yielding 5.8%. You are also given the following information about economic activity and ABC Corporation bonds: - Inflation premium =3.25% - Liquidity premium =0.6% - Maturity risk premium =1.85% - Default risk premium =2.15% a. What is the real risk-free rate of return? (2 points) b. What is the fair interest rate on an ABC Corp. 10-year bond? ( 2 points)