Description: A graph showing the supply, in a red straight line rising to the right, and demand, in a straight blue line descending to the right, for loanable funds with the market interest rates on the vertical axis and money available on the horizontal axis. Initial equilibrium is at 8% interest rate and 300 million dollars.

a. Assuming there are no external controls on interest rates, what will be the likely results on quantity of money saved, on interest rates, and on additional business investment, if the government significantly increases its borrowing to fund its growing deficit spending?

b. At any given interest rate, a significant number of middle-class consumers decide to use their credit cards to fund additional purchases. Assuming there are no external controls on interest rates, what will be the likely results on quantity of money saved, on interest rates, and on additional business investment? Assume no change in government borrowing.