If the government's budget deficit increases and the Ricardo- Barro effect does not apply,
A)investment decreases.
B)investment increases.
C)the real interest rate rises.
D)Both answers A and C are correct.

Question

Quizplus · Accepted Answer

If the Ricardo-Barro effect does not apply, an increase in the government's budget deficit typically leads to higher demand for loanable funds, causing the real interest rate to rise and crowding out private investment, thus decreasing investment.

If the Government's Budget Deficit Increases and the Ricardo- Barro