The economy is at full employment. The economy is a closed economy. There is a decline in the supply of bank loans.

a. Graph and explain the effect of the decline in bank loans on the market for savings and investment funds.

b. Graph and explain the effect of the change in the quantity of investment on the market for labor. Is this an example of the substitution effect or wealth effect?

c. Graph and explain the effect of the change in the production and expenditures sectors on the IS and LM curves.

d. Are the primary effects of the change in productivity on real variables (Y, u) or the rate of inflation?