A Country Initially Has an Equilibrium Real Interest Rate of 4

question 92

Multiple Choice

A country initially has an equilibrium real interest rate of 4 percent and an equilibrium quantity of investment of $2 trillion.The government's budget deficit then increases.According to the crowding-out effect, the

• A) demand for loanable funds curve shifts leftward, the real interest rate falls, and investment increases.
• B) supply of loanable funds curve shifts rightward, the real interest rate rises, and investment increases.
• C) demand for loanable funds curve shifts rightward, the real interest rate falls, and investment increases.
• D) demand for loanable funds curve shifts rightward, the real interest rate rises, and investment decreases.
• E) supply of loanable funds curve shifts leftward, the real interest rate falls, and investment decreases.

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Definitions:

Equitable Allocation

It refers to the fair and impartial distribution of resources or benefits among parties in a given context.

Share Of Profits

The portion of a company's earnings allocated to each share of common stock, indicating the financial benefit for shareholders.

Coalition Building

The process of bringing together diverse groups or individuals with a common interest to form a coalition or alliance to achieve shared objectives.

Opponents

Individuals, groups, or entities that are on opposing sides in a competition, conflict, or negotiation.