If There Is No Ricardo-Barro Effect, a Government Budget Deficit

question 203

Multiple Choice

If there is no Ricardo-Barro effect, a government budget deficit will ________ the equilibrium real interest rate and ________ the equilibrium quantity of investment.

• A) raise; increase
• B) raise; decrease
• C) lower; increase
• D) lower; decrease
• E) not change; not change

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Definitions:

Unrealized Gains

Unrealized gains are increases in the value of investments or assets that have not yet been sold or converted into cash.

Trading Securities

Financial instruments held by a firm for the purpose of resale within a short period to generate income on short-term price differences.

Income Statement

A financial statement that shows a company's revenues and expenses over a specified period, leading to its net profit or loss.

Interest Dates

The specific dates on which interest payments on a debt or investment are made to bondholders or lenders.