According to the Ricardo-Barro Effect, Government Deficits

question 202

Multiple Choice

According to the Ricardo-Barro effect, government deficits

• A) lead to a rise in the equilibrium real interest rate, crowding out investment.
• B) lead to simultaneous increases in private saving and no effect on the equilibrium real interest rate and investment.
• C) lead to simultaneous decreases in private saving and decreases in the equilibrium real interest rate and investment.
• D) lead to a fall in the equilibrium real interest rate and a rise in investment.

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