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PLEASE SHOW ALL WORK CLEARLY AND LABEL EVERYTHING Assume the government starts with a balanced budget and then, because of an increase in government spending (and/or decrease in taxes), starts running a budget deficit. Use the loanable funds model to analyze the effects of a government budget deficit: A. Draw the diagram showing the changes in equilibrium. What happens to the equilibrium values of the interest rate and investment? B. Analyze the effects of a budget surplus.

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PLEASE SHOW ALL WORK CLEARLY AND LABEL EVERYTHING Assume the government starts with a balanced budget and then, because of an increase in government spending (and/or decrease in taxes), starts running a budget deficit. Use the loanable funds model to analyze the effects of a government budget deficit: A. Draw the diagram showing the changes in equilibrium. What happens to the equilibrium values of the interest rate and investment? B. Analyze the effects of a budget surplus

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