If the Ricardo-Barro Effect Is Present, a Government Budget Deficit

question 27

Multiple Choice

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

• A) less; less
• B) more; more
• C) less; more
• D) more; less

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Definitions:

Profit-sharing Plans

Employee benefit plans that provide workers with a share of the company's profits based on its quarterly or annual earnings.

ESOPs

Employee Stock Ownership Plans, which are programs that provide employees with ownership interest in the company.

Pride of Ownership

A sense of satisfaction and accomplishment that individuals feel from owning or being responsible for a particular task or asset.

ESOPs

Acronym for Employee Stock Ownership Plan, a program that gives employees ownership interest in the company through stock ownership, often as an employee benefit.