Q3. Crowding out question. The government is not well financed and needs to borrow money from the private sector. We learned about crowding out effect. What will happen to the private consumption and investment compared to the previous equilibrium state if the government borrows from the private sector? Use the graph to answer. To be specific, What amount does the government borrow according to the graph? What happened to the interest rate and private savings, private consumption, private investment? Private demand (50,6%) O New equilibrium (100,6%) Interest rate UI Old equilibrium (75,5%) Private Borrowing Demand Private + Goverment borrowing Demand Supply of saving 25 50 75 100 125 150 175 200 Saving/Borrowing Answer example: The government borrowing in the equilibrium will be The private investment increase/decrease/ is the same/ is uncertain. The amount is The private savings increase/decrease/ is the same/is uncertain. The amount is The private consumption increase/decrease/ is the same/is uncertain