Question :
28) If there no Ricardo-Barro effect, a government budget deficit : 1240414
28) If there is no Ricardo-Barro effect, a government budget deficit increases
A) private savings and raises the real interest rate.
B) the supply of loanable funds and raises the real interest rate.
C) the demand for loanable funds and raises the real interest rate.
D) investment demand and lowers the real interest rate.
E) private savings and lowers the real interest rate.
29) The crowding-out effect is the tendency for
A) lower private saving to decrease investment.
B) higher government budget deficits to increase total savings.
C) higher government budget deficits to decrease investment.
D) higher private savings to decrease government budget surpluses.
E) lower private saving to increase the budget deficit.
30) The tendency for higher government budget deficits to decrease investment is called the
A) deficit effect.
B) Ricardo-Barro effect.
C) wealth effect.
D) crowding-out effect.
E) inflation effect.
31) The crowding-out effect implies that a government budget deficit ________ the demand for loanable funds and ________ equilibrium investment.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) does not change; does not change
32) If there is no Ricardo-Barro effect, an increase in the budget deficit
A) decreases the amount of investment.
B) lowers the equilibrium real interest rate.
C) increases the amount of investment.
D) decreases the demand for loanable funds.
E) increases the supply of loanable funds.
33) The crowding-out effect describes how a government budget ________ ________ the real interest rate and thereby ________ equilibrium investment.
A) deficit; raises; decreases
B) deficit; lowers; increases
C) surplus; raises; decreases
D) surplus; lowers; decreases
E) deficit; lowers; decreases
34) Suppose the government’s budget deficit increases by $500 billion. If there is no Ricardo-Barro effect, what occurs?
A) The demand for loanable funds curve shifts rightward, the real interest rate rises, and the quantity of loanable funds increases.
B) The supply of loanable funds curve shifts leftward, the real interest rate rises, and the quantity of loanable funds decreases.
C) The demand for loanable funds curve shifts leftward, the real interest rate falls, and the quantity of loanable funds decreases.
D) The supply of loanable funds curve shifts rightward, the real interest rate falls, and the quantity of loanable funds increases.
E) The supply of loanable funds curve shifts leftward, the real interest rate rises, and the quantity of loanable funds increases.
35) A country initially has an equilibrium real interest rate of 4 percent and an equilibrium quantity of investment of $2 trillion. The government’s budget deficit then increases. According to the crowding-out effect, the
A) demand for loanable funds curve shifts leftward, the real interest rate falls, and investment increases.
B) supply of loanable funds curve shifts rightward, the real interest rate rises, and investment increases.
C) demand for loanable funds curve shifts rightward, the real interest rate falls, and investment increases.
D) demand for loanable funds curve shifts rightward, the real interest rate rises, and investment decreases.
E) supply of loanable funds curve shifts leftward, the real interest rate falls, and investment decreases.
36) Suppose the government has a budget deficit of $2 billion. If there is no Ricardo-Barro effect, 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.
37) According to the Ricardo-Barro effect, a government budget
A) surplus increases private saving supply.
B) deficit increases private saving supply.
C) deficit decreases private saving supply.
D) surplus decreases private investment demand.
E) deficit decreases private investment demand.
