If There Is No Ricardo-Barro Effect, the Government

question 211

Multiple Choice

If there is no Ricardo-Barro effect, the government

• A) plays no direct role in the loanable funds market because it doesn't affect either the demand for loanable funds or the supply of loanable funds.
• B) always has negative saving and therefore lowers the real interest rate.
• C) only affects the demand for loanable funds curve in the loanable funds market.
• D) either increases or decreases total supply of loanable funds as its budget deficit or surplus shifts the supply of loanable funds curve.
• E) has no effect because private saving changes to offset the effect that the government's budget deficit or surplus might otherwise have.

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Definitions:

Internalized Values

Beliefs or standards that individuals adopt as their own guiding principles, influencing their behavior and decision-making.

Right of Command

The authority given to a person or position to make decisions, issue orders, and expect them to be followed within an organizational hierarchy.

Relies

Depends on or trusts in someone or something for support, help, or maintenance.

Dependency

The state of relying on or being controlled by someone or something else for support, resources, or decision-making.