After report in newspapers that savings are at an all time low, households begin to save more Using a correctly labeled loanable funds graph, show

After report in newspapers that savings are at an all time low, households begin to save more

1. Using a correctly labeled loanable funds graph, show and explain how the change in savings will impact real interest rates in the US in the short-run.
2. The nominal interest rate is currently at 8% and there is no expected inflation. If government announced a 3% expected inflation rate, determine the value of both:

• new nominal interest rate
• new real interest rate

3.Explain how the change in real interest rates identified in part (1) will affect investment spending by businesses