When Government Saving Is Negative

question 9

Multiple Choice

When government saving is negative,

• A) investment increases.
• B) the real interest rate falls if the crowding- out effect applies.
• C) the real interest rate decreases if the Ricardo- Barro effect does not apply.
• D) the real interest rate increases if the Ricardo- Barro effect does not apply.

---

Definitions:

Minimum Efficient Scale

The smallest level of production a firm can achieve while still taking full advantage of economies of scale regarding costs per unit.

Economies of Scale

The cost advantages that enterprises obtain due to their scale of operation, leading to a reduction in average costs with increased output.

Total Fixed Cost

Total Fixed Cost is the sum of all costs that remain constant regardless of the level of production or business activity.