Refer to the Table Below to Answer the Following Question

question 126

Multiple Choice

Refer to the table below to answer the following question.
Table 7.3.3
-1Table 7.3.3 shows the demand for loanable funds schedule and the private supply of loanable funds schedule when the government's budget is balanced.If the Ricardo- Barro effect occurs, and if the government budget deficit is $2.0 trillion, the real interest rate is _______ percent a year and the quantity of investment is _______ trillion.

• A)3.0; $7.5
• B)5.0; $7.0
• C)5.0; $5.0
• D)9.0; $7.0
• E)7.0; $6.0

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Definitions:

Fixed Manufacturing Overhead

The portion of manufacturing overhead costs that remains constant irrespective of the level of production, such as salaries of supervisors and rent for the factory building.

Variable Costing

A costing method that includes only variable production costs (costs that vary with output) in the cost of goods sold and excludes fixed overhead costs.

Variable Costing

A costing method that includes only variable production costs (materials, labor, and variable manufacturing overhead) in product costs, excluding fixed overhead.

Net Operating Income

The company's profit remaining after operating costs are removed, but prior to the deduction of taxes and interest.