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Suppose the government credibly announces that it will lower business taxes in the future. Assume this improves business confidence about future profits. If private savings

Suppose the government credibly announces that it will lower business taxes in the future. Assume this improves business confidence about future profits. If private savings is independent of the interest rate, then, other things equal, in equilibrium in the current loanable funds market:

consumption and investment both increase

consumption and investment are unchanged

investment increases

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