Question 3 { 12 points). A. Using the long-run model of loanable funds market developed in Chapter 3, graphically illustrate the affect of reducing a govenunent's budget decit by increasing (lump-sum) taxes on household income. In the question, we assume that saving does not depend on interest rates. Be sure to label: i. the axes ii. the curves iii. the initial equilibrium values iv. the direction curves shift v. the terminal equilibrium values. b. State in words what happens to: i. the real interest rate ii. national saving iii. investment iv. consumption v. output