If the Government Begins to Run a Larger Budget Deficits

question 170

Multiple Choice

If the government begins to run a larger budget deficits, then assuming there is no Ricardo -Barro effect, the demand for loanable funds and the real interest rate .

• A) decreases; falls
• B) increases; falls
• C) increases; rises
• D) decreases; rises

---

Definitions:

Consumer Surplus

The difference between the total amount consumers are willing to pay for a good or service and the total amount they actually pay.

Deadweight Loss

The decrease in economic productivity that happens when a good or service does not reach, or cannot reach, its equilibrium point.

Consumer Surplus

The difference between the maximum amount consumers are willing to pay for a good or service and the actual amount they do pay.

Tax Revenue

The wealth accumulated by governments through the process of taxation.