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describe how the loanable funds market will respond to an income tax cut (assuming Ricardian equivalence doesn't hold). In your description, detail which curve is
describe how the loanable funds market will respond to an income tax cut (assuming Ricardian equivalence doesn't hold). In your description, detail which curve is shifting and in what direction it shifts. What happens to the equilibrium real interest rate and quantities of savings and investment?
Explain how, your answer would change if we assumed that Ricardian equivalence holds.
Explain how your answer relates to the crowd-out effect.
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