Question : 21) In the figure above, the SLF curve the supply : 1227793

21) In the figure above, the SLF curve is the supply of loanable funds curve and the PSLF curve is the private supply of loanable funds curve. If there is no ricardo-Barro effect and the government now runs a balanced budget, the

A) interest rate will increase from 4 percent to 6 percent.

B) equilibrium interest rate is 6 percent and investment is $1.6 trillion.

C) equilibrium interest rate is 4 percent and investment is $1.8 trillion.

D) there is a surplus of investment funds and the interest rate falls to 4 percent.

E) there is shortage of investment funds of $0.4 trillion.

22) In the figure above, the SLF curve is the supply of loanable funds curve and the PSLF curve is the private supply of loanable funds curve. If there is no Ricardo-Barro effect, the figure shows a situation in which the government has a budget

A) surplus of $0.2 trillion.

B) deficit of $0.2 trillion.

C) surplus of $1.4 trillion.

D) deficit of $1.6 trillion.

E) surplus of $1.8 trillion.

23) In the figure above, the SLF curve is the supply of loanable funds curve and the PSLF curve is the private supply of loanable funds curve. The equilibrium interest rate is ________ percent and the equilibrium quantity of loanable funds is ________.

A) 6; $12 trillion

B) 6; $14 trillion

C) 4; $13 trillion

D) 4; $11 trillion

E) 4; $14 trillion

24) In the figure above, the DLF curve is the demand for loanable funds curve and the PDLF curve is the private demand for loanable funds curve. If there is no Ricardo-Barro effect, the figure shows a situation in which the government has a budget

A) deficit of $1 trillion.

B) surplus of $1 trillion.

C) deficit of $0.5 trillion.

D) deficit of $1.5 trillion.

E) surplus of $0.5 trillion.

25) In the figure above, the DLF curve is the demand for loanable funds curve and the PDLF curve is the private demand for loanable funds curve. If there is no Ricardo-Barro effect, the figure shows the situation in which the government has a ________ so that the equilibrium real interest rate is ________ and the equilibrium quantity of investment is ________.

A) budget surplus; 4 percent; $1 trillion

B) budget deficit; 4 percent; $1 trillion

C) budget deficit; 6 percent; $1.5 trillion

D) budget surplus; 6 percent; $1.5 trillion

E) balanced budget; 6 percent; $1.5 trillion

26) 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.

27) 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.

28) 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.

29) 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

30) 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.