Macroeconomics 6th Edition by Robert Hall,Marc Lieberman

Exercise 8

For the economy in problem 7, suppose that the government had purchased $2 billion more in goods and services than you found in that problem, with no change in taxes.
a. Explain how each of the variables you calculated in problem 7 would be affected (i.e., state whether it would increase or decrease).
b. Draw a graph illustrating the impact of the $2 billion increase in government purchases on the loanable funds market. Label the equilibrium interest rate, saving, and total quantity of funds demanded at both the original and the new level of government purchases. (Note: You won't be able to find specific numbers.)