According to the Ricardo- Barro effect, government deficits
A) lead to simultaneous decreases in private saving and decreases in the equilibrium real interest rate and investment.
B) lead to a rise in the equilibrium real interest rate, crowding out investment.
C) lead to simultaneous increases in private saving and no effect on the equilibrium real interest rate and investment.
D) lead to a fall in the equilibrium real interest rate and a rise in investment.
Correct Answer:
Verified
Q178: Q179: Technological progress that increases the expected profit Q180: If net taxes exceed government expenditures, the Q181: If China's government runs a budget surplus Q182: France's government is running a budget deficit. Q184: In the absence of the Ricardo- Barro Q185: The Ricardo- Barro effect of a government Q186: The term "crowding out" relates to Q187: The tendency for private saving to increase Q188: The Ricardo- Barro effect proposes that
A) decreases
A) people
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