-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 a situation in which the government has a budget
A) surplus of $0.5 trillion.
B) surplus of $1 trillion.
C) deficit of $1 trillion.
D) deficit of $0.5 trillion.
E) deficit of $1.5 trillion.

Question

-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 a situation in which the government has a budget
A) surplus of $0.5 trillion. 
B) surplus of $1 trillion. 
C) deficit of $1 trillion. 
D) deficit of $0.5 trillion. 
E) deficit of $1.5 trillion.

Quizplus · Accepted Answer

The government has a budget deficit of $1 trillion, indicated by the shift from the private demand for loanable funds curve (PDLF) to the demand for loanable funds curve (DLF), which shows an increase in demand for loanable funds due to government borrowing.

-In the Figure Above, the DLF Curve Is the Demand