-In the Figure Above, the DLF Curve Is the Demand

question 43

Multiple Choice

-In the figure above, the DLF curve is the demand for loanable funds curve and the PDLF curve is the private demand for loanable funds curve. If there is no Ricardo-Barro effect, the figure shows the situation in which the government has a ________ so that the equilibrium real interest rate is ________ and the equilibrium quantity of investment is ________.

• A) budget deficit; 4 per cent; $1 trillion
• B) budget surplus; 6 per cent; $1.5 trillion
• C) budget deficit; 6 per cent; $1.5 trillion
• D) balanced budget; 6 per cent; $1.5 trillion
• E) budget surplus; 4 per cent; $1 trillion

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