-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

---

Definitions:

Zero Correlation

Zero correlation indicates a lack of any linear relationship between two variables, meaning one variable does not predict the movement of the other.

Positive Correlation

A relationship between two variables where an increase in one variable is associated with an increase in the other variable.

Achievement Tests

Standardized tests designed to assess a person's level of skill, accomplishment, or knowledge in a specific area.

Nurture

The influence of external factors like environment and upbringing on the development and behavior of an individual.