-In the Figure Above, the DLF Curve Is the Demand

question 115

Multiple Choice

-In the figure above, the DLF curve is the demand for loanable funds curve and the PDLF curve is the private demand for loanable funds curve.If there is no Ricardo-Barro effect, the figure shows the situation in which the government has a ________ so that the equilibrium real interest rate is ________ and the equilibrium quantity of investment is ________.

• A) budget surplus; 4 percent; $1 trillion
• B) budget deficit; 4 percent; $1 trillion
• C) budget deficit; 6 percent; $1.5 trillion
• D) budget surplus; 6 percent; $1.5 trillion
• E) balanced budget; 6 percent; $1.5 trillion

---

Definitions:

Periodic Payments

Regular payments made over a specified period, such as those for leases, loans, or installment purchases.

Operating Line of Credit

A type of financing arrangement providing a business with the ability to borrow money up to a certain limit for operational purposes.

Negative Cash Balance

A situation where a company or individual's cash account balance drops below zero, indicating that the account is overdrawn.