Assume that the United States begins deficit spending to fund new social welfare programs.

1. Using a correctly labeled loanable funds graph, show and explain the impact of the new spending on real interest rates in the United States.
2. Explain the impact of the change in interest rates you identified in part (A) on each of the following:
3. Capital investment
4. Long-term economic growth
5. The international value of the U.S. dollar