In the Figure Above, the SLF Curve Is the Supply

question 17

Multiple Choice

In the figure above, the SLF curve is the supply of loanable funds curve and the PSLF curve is the private supply of loanable funds curve.
- If there is no ricardo-Barro effect and the government now runs a balanced budget, the

• A)there is shortage of investment funds of $0.4 trillion.
• B)interest rate will increase from 4 percent to 6 percent.
• C)there is a surplus of investment funds and the interest rate falls to 4 percent.
• D)equilibrium interest rate is 4 percent and investment is $1.8 trillion.
• E)equilibrium interest rate is 6 percent and investment is $1.6 trillion.

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Definitions:

Rent-Seeking Behavior

Efforts focused on expanding an individual's portion of current wealth without generating additional wealth, frequently via altering the economic landscape.

Landlords

Individuals or entities that own property and rent it out to tenants in exchange for rent payments.

Subsidizing Rent

A government policy of providing financial assistance to help cover the cost of rent for individuals or households.

Elastic

Describes how much the quantity demanded of a good responds to a change in the price of that good, with higher elasticity indicating a greater response.