If there is no Ricardo-Barro effect, an increase in the government budget surplus
A) increases the supply of loanable funds.
B) increases private saving.
C) decreases the supply of loanable funds.
D) decreases private saving.
E) has no effect on the demand for loanable funds, the supply of loanable funds, or the real interest rate.

Question

Quizplus · Accepted Answer

An increase in the government budget surplus means the government is saving more, which increases the overall supply of loanable funds in the economy.

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