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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