China's Government Runs a Budget Surplus.As a Result

question 5

Multiple Choice

China's government runs a budget surplus.As a result,

• A) if there is no Ricardo-Barro effect, the supply of loanable funds curve lies to the right of the private supply of loanable funds curve.
• B) interest rates should increase.
• C) the Ricardo-Barro effect predicts that the real interest rate will increase.
• D) the quantity of loanable funds decreases.
• E) saving will exceed investment.

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Definitions:

Variable Input

An input whose quantity can be changed in the short run to increase or decrease production.

Average Product of Labor

The output produced per unit of labor input, calculated by dividing total output by the total number of labor units used.

Variable Input

A production factor that can be adjusted in the short term to change the level of output, such as labor or raw materials.

Fixed Costs

Costs that do not change with the level of output produced by a firm, such as rent, salaries, and equipment costs.