A Prediction of the Ricardo-Barro Effect Is

question 36

Multiple Choice

A prediction of the Ricardo-Barro effect is

• A) a larger increase in the real interest rate when the government runs a budget deficit.
• B) a larger decrease in the real interest rate when the government runs a budget surplus.
• C) no effect on the real interest rate when the government runs a budget deficit.
• D) a larger decrease in investment when the government runs a budget deficit.
• E) a larger decrease in investment when the government runs a budget surplus.

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