-In the Figure Above, If There Is No Ricardo-Barro Effect

question 19

Multiple Choice

-In the figure above, if there is no Ricardo-Barro effect, the government has a budget ________ because the ________.

• A) deficit of 0.4 trillion; SLF curve shows a smaller quantity of LF than the PSLF curve.
• B) surplus of 0.2 trillion; SLF curve lies to the right of the PSLF curve.
• C) deficit of 0.2 trillion; SLF curve lies to the right of the PSLF curve.
• D) surplus of -0.2 trillion; SLF curve lies to the right of the PSLF curve.
• E) surplus of 0.4 trillion; SLF curve shows a larger quantity of LF than the PSLF curve.

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Definitions:

Price Effect

Describes how changes in prices impact the quantity supplied and demanded in a market.

Downward-Sloping Demand

A market condition reflected in a demand curve where the quantity demanded of a good decreases as the price of that good increases, and vice versa.

Total Surplus

The sum of consumer and producer surplus; a measure of the overall benefit to society from a market transaction.

Perfectly Price-Discriminated

A pricing strategy situation where a seller charges the maximum possible price for each unit consumed that consumers are willing to pay, thereby capturing all potential consumer surplus.