Question : 41) The Ricardo-Barro effect argues that the crowding-out effect A) : 1238013

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

49) 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.

50) 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