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

question 221

Multiple Choice

If there is no Ricardo-Barro effect, a government budget surplus ________ the total supply of loanable funds and ________ the real interest rate.

• A) increases; raises
• B) increases; lowers
• C) decreases; raises
• D) decreases; lowers
• E) does not change; does not change

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Definitions:

Accounting Equation

The foundational principle of accounting that states assets equal liabilities plus equity.

Accounts Payable

Liabilities representing amounts owed by a company to creditors for purchases of goods and services on credit.

Limited Liability Company (LLC)

A business form consisting of one or more persons or entities filing an operating agreement with a state to conduct business with limited liability to the owners, yet treated as a partnership for tax purposes.

Separate Legal

Refers to a legal entity, such as a corporation, that is legally distinct from its owners.