Using the loanable funds theory, show in properly labelled graphs, how does each of the following events affect the supply and demand for loans and the equilibrium reinterest rate:

I. Wars in other countries lead to higher government spending in those countries. You need to illustrate (on the proper, well labeled graph) and explain.10 marks

II.A new technology is invented that makes firms more productive. Many firms want to buy more productive machines and computer. Higher productivity also increases people's confidence in the economy, so consumers see less need to save. You need to illustrate (on the proper, well labeled graph) and explain.10marks.