If There Is No Ricardo-Barro Effect, When the Government Runs

question 62

Multiple Choice

If there is no Ricardo-Barro effect, when the government runs a budget surplus, it

• A)shifts the demand for loanable funds curve rightward.
• B)shifts the supply of loanable funds curve leftward.
• C)shifts the demand for loanable funds curve leftward.
• D)contributes to financing investment.
• E)competes with businesses for private saving.

---

Definitions:

Variable Expenses

Costs that vary in direct proportion to changes in the level of activity or volume of production.

Fixed Expenses

Obligations that remain constant in total regardless of changes in business activity levels, such as lease payments and salaries.

Cost Formula Equation

An equation that determines the total cost based on fixed costs, variable rate per unit of activity, and the level of activity.

High-low Method

A technique used in cost accounting to estimate fixed and variable costs based on the highest and lowest levels of activity.