China's government runs a budget budget surplus. As a result,
A)if there is no Ricardo-Barro effect, the supply of loanable funds curve lies to the right of the private supply of loanable funds curve.
B)the quantity of loanable funds decreases.
C)interest rates should increase.
D)saving will exceed investment.
E)the Ricardo-Barro effect predicts that the real interest rate will increase.

Question

Quizplus · Accepted Answer

When the government runs a budget surplus, it adds to the supply of loanable funds, shifting the supply curve to the right of the private supply of loanable funds curve, assuming no Ricardo-Barro effect.

China's Government Runs a Budget Budget Surplus