The Ricardo-Barro Effect Holds That

question 67

Multiple Choice

The Ricardo-Barro effect holds that

• A) equal increases in taxes and government expenditures have no effect on equilibrium real GDP.
• B) government budget deficits have no effect on the real interest rate.
• C) a government budget deficit crowds out private investment.
• D) a government budget deficit induces a decrease in saving that magnifies the crowding out effect.

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Definitions:

Break-Even Point

The point at which total cost and total revenue are equal, resulting in no net loss or gain for the business.

Variable Costs

Expenses that vary in relation to the amount of products or services a company generates.

Fixed Costs

Expenses that do not change with the level of goods or services produced by a business, such as rent, salaries, or loan payments.

Units

In the context of inventory or production, refers to the individual items or components that can be counted or measured.