Question : 38) According to the Ricardo-Barro effect, an increase in the : 1240415

 

38) According to the Ricardo-Barro effect, an increase in the government budget deficit

A) does not change the real interest rate.

B) lowers the real interest rate.

C) shifts the supply of loanable funds curve leftward.

D) has no effect on the nominal interest rate but does change the real interest rate.

E) shifts the demand for loanable funds curve leftward.

39) The Ricardo-Barro effect refers to how ________ in response to a government budget ________.

A) investment demand changes; surplus

B) investment demand changes; deficit

C) saving supply changes; deficit

D) government budget changes; surplus or deficit

E) investment demand and saving supply change; surplus

 

40) A prediction of the Ricardo-Barro effect is

A) a larger increase in the real interest rate when the government runs a budget deficit.

B) a larger decrease in the real interest rate when the government runs a budget surplus.

C) no effect on the real interest rate when the government runs a budget deficit.

D) a larger decrease in investment when the government runs a budget deficit.

E) a larger decrease in investment when the government runs a budget surplus.

 

41) The Ricardo-Barro effect argues that the crowding-out effect

A) is the result of a government budget surplus and higher interest rates.

B) will not occur, because the private saving supply will change to offset any change in the government budget deficit.

C) is the result of the government budget deficit and higher interest rates.

D) will occur, because the private saving supply will change to offset any change in the government budget deficit.

E) is stronger when the government runs a budget surplus than when it runs a budget deficit.

42) The Ricardo-Barro effect is based on the idea that ________ when the government has a budget deficit.

A) people decrease their private saving

B) people increase their private saving

C) investment demand increases because expected future profits increase

D) investment demand decreases because of the higher real interest rate

E) people immediately increase their tax payments

 

43) Evidence to support the Ricardo-Barro effect would show that

A) higher government budget deficits decrease investment.

B) higher government budget surpluses decrease investment.

C) government budget deficits increase household consumption.

D) government budget deficits have no effect on the real interest rate or investment.

E) higher government budget deficits raise the real interest rate.

 

44) Suppose the government has a budget deficit of $2 billion. If the Ricardo-Barro effect is correct, then how much crowding out of investment occurs?

A) more than $2 billion

B) some crowding out occurs, but less than $2 billion

C) exactly equal to $2 billion dollars

D) No crowding out occurs and investment does not change.

E) No crowding out occurs because investment increases by $2 billion.

 

45) The above table has the private demand for loanable funds and the private supply of loanable funds schedules. If the government budget surplus is $200 billion, and there is no Ricardo-Barro effect, the equilibrium real interest rate is ________ and the equilibrium quantity of loanable funds is ________.

A) 6 percent; $600 billion

B) 4 percent; $700 billion

C) 8 percent, $500 billion

D) 8 percent; $700 billion

E) 4 percent; $500 billion

 

46) The above table has the private demand for loanable funds and the private supply of loanable funds schedules. If the government budget deficit is $200 billion, and there is no Ricardo-Barro effect, the equilibrium real interest rate is ________ and the equilibrium quantity of investment is ________.

A) 6 percent; $600 billion

B) 4 percent; $700 billion

C) 8 percent, $500 billion

D) 8 percent; $700 billion

E) 4 percent; $500 billion

47) The above table has the private demand for loanable funds and the private supply of loanable funds schedules. If the government budget surplus is $200 billion, and there is a Ricardo-Barro effect, the equilibrium real interest rate is ________ and the equilibrium quantity of loanable funds is ________.

A) 6 percent; $600 billion

B) 4 percent; $700 billion

C) 8 percent, $500 billion

D) 8 percent; $700 billion

E) 4 percent; $500 billion

 

48) The above table has the private demand for loanable funds and the private supply of loanable funds schedules. If the government budget deficit is $200 billion, and there is a Ricardo-Barro effect, the equilibrium real interest rate is ________ and the equilibrium quantity of investment is ________.

A) 6 percent; $600 billion

B) 4 percent; $700 billion

C) 8 percent, $500 billion

D) 8 percent; $700 billion

E) 4 percent; $500 billion