The current market rate of interest is 10 percent. At that rate of interest, businesses borrow $300 billion per year for investment and consumers borrow $50 billion per year to finance purchases. The government is currently borrowing $150 billion per year to cover its budget deficit. b. Assuming taxpayers do not anticipate an increase in the future market rate of interest due to the increase in budget deficit, show the impact of the increase in the budget deficit on the market for loanable funds.

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