If There Is No Ricardo-Barro Effect, the Government

question 118

Multiple Choice

If there is no Ricardo-Barro effect, the government

• A)has no effect because private saving changes to offset the effect that the government's budget deficit or surplus might otherwise have.
• B)plays no direct role in the loanable funds market because it doesn't affect either the demand for loanable funds or the supply of loanable funds.
• C)increases the supply of loanable funds if it has a budget surplus and shifts the supply of loanable funds curve.
• D)always has negative saving and therefore lowers the real interest rate.
• E)only affects the demand for loanable funds curve in the loanable funds market.