Question 1. Consider a closed economy. Define private saving as the part of the disposable income of households that they do not consume (i.e., Sp = YD C ). a) Suppose that government has a balanced budget: T = G. Show that private saving is equal to investment. b) Now suppose that government spending is not equal to tax revenue. How the government finances its excess spending (G-T> 0 )? Let's call this excess spending as D = G-T. c) Still assume that G>T. What is equilibrium level of investment equals to? d) What happens to equilibrium level of investment and interest rate if government spending increases, but tax revenue remains the same? What is the economic intuition behind this result? Explain with at most 3 sentences.