The Ricardo-Barro Effect Holds That

question 36

Multiple Choice

The Ricardo-Barro effect holds that

• A)equal increases in taxes and government expenditures have no effect on equilibrium real GDP.
• B)a government budget deficit has 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.
• E)a government budget deficit increases the real interest rate.

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Definitions:

Excludable

A characteristic of a good or service that allows owners or producers to prevent others from using it without permission or payment.

Rival

An entity competing against another in the same market, striving for a greater share of assets, customers, or recognition.

Nonexcludable

A property of a good where it is not possible to prevent individuals from consuming the good, regardless of whether they have paid for it.

Clean Water

Water that is free from pollutants and contaminants, making it safe for human consumption and use.