Question 1

A government budget deficit ________ the demand for loanable funds and ________ investment.

Accepted Answer

A government budget deficit increases the demand for loanable funds because the government needs to borrow more money to finance its spending. This increase in demand for loanable funds leads to an increase in interest rates, which in turn decreases investment. Therefore, option B correctly identifies that a government budget deficit increases the demand for loanable funds and decreases investment.

Question 2

When a government has a budget surplus,the surplus

Accepted Answer

A budget surplus means that the government is spending less than it is earning in revenue. This excess of funds can be used to finance investments, such as infrastructure projects, education, or research and development. Therefore, a budget surplus helps finance investment.

Question 3

Use the table below to answer the following question.
Table 23.3.1
Data from Northland
 
-Refer to Table 23.3.1.Table 23.3.1 shows the market for loanable funds in Northland.The government budget is balanced.If the government moves from a balanced budget to a surplus of $20 billion,the new equilibrium has a real interest rate of ________ percent and quantity of loanable funds traded equal to ________.

Accepted Answer

The answer of Use the table below to answer the...

Question 4

If China's government increases its budget surplus,there is ________ in the supply of loanable funds,private saving ________ and investment ________.

Accepted Answer

The answer of If China's government increases its budget surplus,there...

Question 5

According to the Ricardo-Barro effect,

Accepted Answer

The answer of According to the Ricardo-Barro effect,
...

Question 6

When government saving is negative,

Accepted Answer

The answer of When government saving is negative,
...

Question 7

If net taxes exceed government expenditures,the government sector has a budget ________ and government saving is ________.

Accepted Answer

A surplus occurs when net taxes exceed government expenditures, meaning that the government has extra money left over. Government saving is positive because the government is adding to its savings.

Question 8

If the Ricardo-Barro effect occurs,________ in private saving finances the government budget deficit and the real interest rate ________.

Accepted Answer

The Ricardo-Barro effect occurs when people anticipate future taxes from the government to pay off the government deficit. As a result, private saving increases to finance the government deficit. This increase in private saving will put downward pressure on interest rates, which will remain the same as a result of increased loanable funds.

Question 9

A government budget deficit ________ the demand for loanable funds,________ the real interest rate,and ________ investment.

Accepted Answer

The answer of A government budget deficit ________ the demand...

Question 10

If the government begins to run a larger budget deficit,the demand for loanable funds ________ and the real interest rate ________.

Accepted Answer

The answer of If the government begins to run a...

Question 11

The tendency for private saving to increase in response to growing government deficits is known as the

Accepted Answer

The tendency for private saving to increase in response to growing government deficits is known as the Ricardo-Barro effect, named after economists David Ricardo and Robert Barro. According to this effect, individuals increase their private saving when they expect future tax increases to pay off the public debt caused by the government deficits, and this reduces the effectiveness of government borrowing in stimulating aggregate demand.

Question 12

If the Ricardo-Barro effect occurs,a government budget deficit raises the equilibrium real interest rate by ________ and decreases the equilibrium quantity of investment by ________ if the Ricardo-Barro effect is absent.

Accepted Answer

The answer of If the Ricardo-Barro effect occurs,a government budget...

Question 13

A decrease in the government budget deficit decreases the ________ loanable funds and an increase in the government budget surplus increases the ________ loanable funds.

Accepted Answer

The answer of A decrease in the government budget deficit...

Question 14

According to the Ricardo-Barro effect,government deficits

Accepted Answer

The answer of According to the Ricardo-Barro effect,government deficits
...

Question 15

The Ricardo-Barro effect of a government budget deficit is

Accepted Answer

The answer of The Ricardo-Barro effect of a government budget...

Question 16

The tendency for a government budget deficit to decrease investment is called the

Accepted Answer

The crowding-out effect occurs when the government borrows money to finance a budget deficit, which increases demand for loanable funds, leading to higher interest rates. This decrease in investment by the private sector due to higher interest rates is called the crowding-out effect.

Question 17

The crowding-out effect refers to

Accepted Answer

The answer of The crowding-out effect refers to
...

Question 18

The Ricardo-Barro effect holds that

Accepted Answer

The answer of The Ricardo-Barro effect holds that
...

Question 19

According to the Ricardo-Barro effect,

Accepted Answer

The answer of According to the Ricardo-Barro effect,
...

Question 20

Crowding out leads to all of the following EXCEPT

Accepted Answer

The answer of Crowding out leads to all of the...

Quiz 23: Finance,saving,and Investment

A government budget deficit the demand for loanable funds and investment.

When a government has a budget surplus,the surplus

If China's government increases its budget surplus,there is in the supply of loanable funds,private saving and investment .

According to the Ricardo-Barro effect,

When government saving is negative,

If net taxes exceed government expenditures,the government sector has a budget and government saving is .

If the Ricardo-Barro effect occurs, in private saving finances the government budget deficit and the real interest rate .

A government budget deficit the demand for loanable funds, the real interest rate,and investment.

If the government begins to run a larger budget deficit,the demand for loanable funds and the real interest rate .

The tendency for private saving to increase in response to growing government deficits is known as the

If the Ricardo-Barro effect occurs,a government budget deficit raises the equilibrium real interest rate by and decreases the equilibrium quantity of investment by if the Ricardo-Barro effect is absent.

A decrease in the government budget deficit decreases the loanable funds and an increase in the government budget surplus increases the loanable funds.

According to the Ricardo-Barro effect,government deficits

The Ricardo-Barro effect of a government budget deficit is

The tendency for a government budget deficit to decrease investment is called the

The crowding-out effect refers to

The Ricardo-Barro effect holds that

According to the Ricardo-Barro effect,

Crowding out leads to all of the following EXCEPT