Question : 10.3   Government in Loanable Funds Market 1) For a government to : 1238009

10.3   Government in Loanable Funds Market

1) For a government to add to the supply of loanable funds, it must

A) borrow.

B) have a budget surplus.

C) have a budget deficit.

D) raise the real interest rate.

E) increase its investment demand.

2) If a government has a budget deficit, it must

A) borrow in the loanable funds market.

B) increase taxes.

C) lower the real interest rate.

D) decrease its expenditures.

E) decrease taxes.

3) Government saving is equal to

A) the quantity of investment demanded.

B) net taxes minus government expenditures.

C) net taxes plus government expenditures.

D) private savings minus government expenditures.

E) net taxes.

4) If there is no Ricardo-Barro effect, the government

A) plays no direct role in the loanable funds market because it doesn’t affect either the demand for loanable funds or the supply of loanable funds.

B) always has negative saving and therefore lowers the real interest rate.

C) only affects the demand for loanable funds curve in the loanable funds market.

D) increases the supply of loanable funds if it has a budget surplus and shifts the supply of loanable funds curve.

E) has no effect because private saving changes to offset the effect that the government’s budget deficit or surplus might otherwise have.

5) If there is no Ricardo-Barro effect, an increase in the government budget surplus

A) decreases private saving.

B) increases private saving.

C) decreases the supply of loanable funds.

D) increases the supply of loanable funds.

E) has no effect on the demand for loanable funds, the supply of loanable funds, or the real interest rate.

6) If there is no Ricardo-Barro effect, a government budget surplus

A) increases the supply of loanable funds.

B) decreases the supply of loanable funds.

C) increases the demand for loanable funds.

D) decreases the demand loanable funds.

E) has no effect on the demand for loanable funds, the supply of loanable funds, or the real interest rate.

7) If there is no Ricardo-Barro effect, an increase in the government budget surplus will

A) decrease the supply of loanable funds.

B) raise the real interest rate.

C) lower the real interest rate.

D) decrease the demand for loanable funds.

E) not change the demand for loanable funds, the supply of loanable funds, or the real interest rate.

8) If there is no Ricardo-Barro effect, an increase in the government budget deficit

A) raises the equilibrium real interest rate.

B) lowers the equilibrium real interest rate.

C) decreases the demand for loanable funds.

D) decreases the supply of loanable funds.

E) increases the supply of loanable funds.

9) If there is no Ricardo-Barro effect, a government budget surplus ________ the total supply of loanable funds and ________ the real interest rate.

A) increases; raises

B) increases; lowers

C) decreases; raises

D) decreases; lowers

E) does not change; does not change

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

A) decreases the supply of loanable funds and lowers the real interest rate.

B) decreases the demand for loanable funds and increases the real interest rate.

C) increases the demand for loanable funds and lowers the real interest rate.

D) increases the supply of loanable funds and lowers the real interest rate.

E) increases the demand for loanable funds and raises the real interest rate.