For each prompt below, carefully and thoroughly follow the directions. For the graphs, be certain to accurately label all axes, curves, and points as appropriate. Use arrows to indicate the direction of any shifts. Show your work for any calculations.

Country X is currently maximizing its resources and employment to produce consumer goods and capital goods. The government has a balanced budget.

(a) Illustrate the economy of Country X on a fully labeled production possibilities curve, assuming increasing opportunity cost. Label a point where the economy is currently operating as point X.

(c) On a fully labeled loanable funds market graph, illustrate the impact of the policy from part (b) on the equilibrium real interest rate and the equilibrium quantity of funds.

(d) Assume that Country X is still maximizing resource use. On your PPC graph from part (a), illustrate the short-run impact of the change in real interest rates. Illustrate a new production point as point R.