A prediction of the Ricardo-Barro effect is
A) a larger increase in the real interest rate when the government runs a budget deficit.
B) a larger decrease in the real interest rate when the government runs a budget surplus.
C) no effect on the real interest rate when the government runs a budget deficit.
D) a larger decrease in investment when the government runs a budget deficit.
E) a larger decrease in investment when the government runs a budget surplus.
Correct Answer:
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