
In the figure above, the DLF curve is the demand for loanable funds curve and the PDLF curve is the private demand for loanable funds curve.
- If there is no Ricardo-Barro effect, the figure shows the situation in which the government has a --------------------so that the equilibrium real interest rate is--------------------
and the equilibrium quantity of investment is-------------------- .
A) budget deficit; 4 percent; $1 trillion
B) budget deficit; 6 percent; $1.5 trillion
C) balanced budget; 6 percent; $1.5 trillion
D) budget surplus; 6 percent; $1.5 trillion
E) budget surplus; 4 percent; $1 trillion
Correct Answer:
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