If there is no Ricardo-Barro effect, an increase in the government budget deficit
A)lowers the equilibrium real interest rate.
B)increases the supply of loanable funds.
C)decreases the demand for loanable funds.
D)raises the equilibrium real interest rate.
E)decreases the supply of loanable funds.

Question

Quizplus · Accepted Answer

Without the Ricardo-Barro effect, an increase in the government budget deficit leads to higher demand for loanable funds, which raises the equilibrium real interest rate.

If There Is No Ricardo-Barro Effect, an Increase in the Government