According to the Ricardo-Barro effect, O A. a government deficit crowds out investment O B. a government deficit leads to lower taxes in the future O C. taxpayers decrease their saving by an amount equal to the government budget deficit O D. taxpayers increase their saving by an amount equal to the government budget deficit

According to the Ricardo-Barro effect, O A. a government deficit crowds out investment O B. a government deficit leads to lower taxes in the future O C. taxpayers decrease their saving by an amount equal to the government budget deficit O D. taxpayers increase their saving by an amount equal to the government budget deficit

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter31: The Impacts Of Government Borrowing

Section: Chapter Questions

Problem 4SCQ: Imagine an economy in which Ricardian equivalence holds. This economy has a budget deficit of 50, a...

See similar textbooks

Similar questions

Which statement is a major consequence of high government budget deficits? a) All else held constant, high budget deficits financed by borrowing will lead to lower interest rates. b) If the government finances the deficit by borrowing money, it can crowd out business investment. c) Budget deficits cause unemployment as firms relocate to countries with balanced budgets. d) Printing money to finance the deficit can lead to a significantly deflationary environment.
1) In a closed economy, investment cannot be equal to private savings.A) TrueB) False 2)A rise in risk premium will cause bond market prices to rise.A) TrueB) False 3)If the government is running a budget deficit and private saving is less than investment, thecountry must be running a trade deficit at equilibrium.A) TrueB) False
Other things equal, when the government runs a large budget deficit, it _____ national saving and thereby _____ capital formation and productivity growth. a) increase;increase b)decreases;decreases c)increase;decreases d;decreases;increases
ONLY answer! NO explanation! 1. Which of the following statement is true?a) Investment tax incentive increases investment, which increases productivity growth and living standards in the long run.b) Budget deficit reduces investment, which reduces productivity growth and living standards.c) Both investment tax incentive and budget deficit causes net exports to falld) all of the above 2. Which of the following caused a trade deficit in the USA during 1990s?a) Although national saving increased in the 1990s, investment increased even at a faster rate.b) Slowdown in national savings but a rapid increase in investment.c) Huge government deficit.d) An increase in government spending. 3. Let the govt. removed previous tax incentive for investment. What kind of effect will this have on the real interest rate?a) The real interest rate will remain unaffected.b) The real interest rate will increase.c) The real interest rate will decrease.d) No effect. 4. Following the previous question, what…
Given the numbers below, a. show that the country has a twin deficit?b. Find the output Y? c. Find the private saving, public saving, and national saving?d. Find the net exports?Tax: T= 500 dollars.Gov’t spending: G= 700 dollars.Disposable income Yd = 900 dollars.Consumption: C= 400 dollars.Investment: I= 500 dollars
Explain how current account and budget deficit (twin deficit) are related so that changes in one are reflected in changes in the other .Explain.
Consider the following data (in billion $) for a country in a particular year: (assume this country has Zero Transfer Payment Personal consumption expenditure (C) 200 Exports (x) 10 Government Purchases of goods and services (G) 120 Imports (m) 15 Gross Domestic Product (Y) 1800 Taxes 20 d. What is the value of gross investment? e. What is the value of net export? f. Is the country lending to or borrowing from rest of the world? g. Dose the government has deficit, balance or surplus budget? h. What is the amount of investment financed by national saving? i. What is the amount of investment financed by borrowing from rest of the world? J. What is the meaning of transfer payment
Explain how current account and budget deficit (twin deficit) are related so that changes in one are reflected in changes in the other . thanks.
onsider the following data (in billion $) for a country in a particular year: (assume this country has Zero Transfer Payment Personal consumption expenditure (C) 200 Exports (x) 10 Government Purchases of goods and services (G) 120 Imports (m) 15 Gross Domestic Product (Y) 1800 Taxes 20 d. What is the value of gross investment? e. What is the value of net export? f. Is the country lending to or borrowing from rest of the world? g. Dose the government has deficit, balance or surplus budget? h. What is the amount of investment financed by national saving? i. What is the amount of investment financed by borrowing from rest of the world? J. What is the meaning of transfer payment
6. After a tax increase, households often reduce spending and save more. This canresult in:a. An increase in the national budget deficitb. An increase in public and private savingsc. A long-run decrease in capital accumulationd. A short-run decrease in national savings and investment, and a long-rundecrease in productivity
One objection to deficit spending is that it increases the demand for loanable funds thereby putting upward pressure on interest rates that crowds out private investment spending thereby lowering future U.S. growth. (1) What is the general level of interest rates in 2020?
Imagine that the U.S. economy finds itself in the following situation: a government budget deficit of $100 billion, total domestic savings of $1,500 billion, and total domestic physical capital investment of $1,600 billion. According to the national saving and investment identity, what will be the trade balance? What will be the trade balance if investment rises by $50 billion, while the budget deficit and national savings remain the same?