Question : 41) Evidence to support the Ricardo-Barro effect would show that A) : 1227795

 

 

41) 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.

42) 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.

 

 

43) 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

44) 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

 

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 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

 

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 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

47) During financial crisis of 2008-09, the government rescued financial firms and the auto industry. As a result,

A) the government’s budget deficit increased, the government’s demand for loanable funds increased and private investment was crowded out.

B) real interest rates decreased.

C) the supply of loanable funds decreased in response to the government’s budget deficit.

D) the private demand for loanable funds increased.

E) the government’s rescue plan created a surplus of loanable funds.

 

48) As a result of the government’s rescue of financial firms and the auto industry in 2008, which of the following occurred?

i)The government’s demand for loanable funds increased the real interest rate.

ii)Investment expenditures were crowded out.

iii)The supply of loanable funds curve shifted leftward.

A) i and ii

B) i, ii and iii

C) i only

D) ii only

E) ii and iii

 

49) With no Ricardo-Barro effect, a government budget surplus

A) increases the supply of loanable funds.

B) increases the demand for loanable funds.

C) decreases the supply of loanable funds.

D) decreases the demand for loanable funds.

E) has no effect on either the supply or the demand for loanable funds.

50) Suppose the government has a budget surplus. Then

A) private saving is equal to investment.

B) private saving is greater than investment and government saving is positive.

C) private saving is less than investment and government saving is positive.

D) private investment is greater than the sum of government saving and private saving.

E) private saving is greater than investment and government saving is negative.

 

51) With is no Ricardo-Barro effect, a government budget surplus ________ the real interest rate because the ________ loanable funds increases.

A) raises; demand for

B) lowers; demand for

C) raises; supply of

D) lowers; supply of

E) None of the above answers are correct because the real interest rate does not change.

 

52) The “crowding-out effect” refers to how a government budget deficit

A) shifts only the supply of loanable funds curve leftward.

B) shifts only the demand for loanable funds curve leftward.

C) shifts both the demand for and the supply of loanable funds curves leftward.

D) decreases the equilibrium quantity of investment.

E) increases the equilibrium quantity of investment.

 

53) If there is no Ricardo-Barro effect, a government budget deficit will ________ the equilibrium real interest rate and ________ the equilibrium quantity of investment.

A) raise; increase

B) raise; decrease

C) lower; increase

D) lower; decrease

E) not change; not change

54) The Ricardo-Barro effect says that a government budget deficit leads to

A) a higher real interest rate.

B) a lower real interest rate.

C) no change in the real interest rate.

D) an increase in demand for loanable funds.

E) an increase in the quantity of investment.