4. Using a budget constraint and indifference curves and a two period model (this year and next year), illustrate how the individual's decision to save/consume is affected by a reduction in the interest rate. 5. Consider the market for loanable funds. In a well-labeled supply-demand diagram, illustrate the equilibrium in this market. Describe how the market reacts to the following changes. a. A financial crisis makes individuals less inclined to buy securities on the market. b. A financial crisis both makes individuals less inclined to buy securities and firms less inclined to raise funds on the securities markets. c. The end of a financial crisis encourages firms to seek funds on securities markets and individuals to buy securities.