Consider an economy in the long run with real GDP equal to the level of potential output, '1". a) Draw the diagram of the market for nancial capital. Explain why the investment demand curve and the national savings curve slope downward and upward respectively. (2 marks} b) Suppose government pursued a scal contraction by reducing the level of government purchases. Explain what would happen to the equilibrium interest rate, the amount of investment in the economy, and the long-run growth rate. (2 marks} c) Now suppose the scal contraction occurs by increasing taxes. Explain what effect this would have on the interest rate, investment, and long-run growth rate. (2 marks)