The table sets out the data for an economy when the government's budget is balanced. If the government's budget becomes a deficit of $3.0 billion and the Ricardo-Barro effect occurs, what are the real interest rate and investment? If the Ricardo-Barro effect occurs, and if the government's budget becomes a deficit of $3.0 billion, the real interest rate is percent a year and the quantity of investment is $ >>> Answer to 1 decimal place. billion. There crowding out in this situation because O A. is; investment is $8.0 billion but private saving is $11.0 billion, which means that investment is decreased by the amount of the government deficit OB. is no; the government budget deficit does not influence the real interest rate. Real interest rate (percent per year) 4 5 6 7 8 9 10 Loanable funds Loanable funds supplied demanded (billions of 2007 dollars) 8.5 8.0 7.5 7.0 6.5 6.0 5.5 7.5 8.0 8.5 9.0 9.5 10.0 10.5

The table sets out the data for an economy when the government's budget is balanced. If the government's budget becomes a deficit of $3.0 billion and the Ricardo-Barro effect occurs, what are the real interest rate and investment? If the Ricardo-Barro effect occurs, and if the government's budget becomes a deficit of $3.0 billion, the real interest rate is percent a year and the quantity of investment is $ >>> Answer to 1 decimal place. billion. There crowding out in this situation because O A. is; investment is $8.0 billion but private saving is $11.0 billion, which means that investment is decreased by the amount of the government deficit OB. is no; the government budget deficit does not influence the real interest rate. Real interest rate (percent per year) 4 5 6 7 8 9 10 Loanable funds Loanable funds supplied demanded (billions of 2007 dollars) 8.5 8.0 7.5 7.0 6.5 6.0 5.5 7.5 8.0 8.5 9.0 9.5 10.0 10.5

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter17: Federal Deficits, Surpluses, And The National Debt

Section: Chapter Questions

Problem 7SQP

See similar textbooks

Similar questions

A government starts off with a total debt of $3.5 billion. In year one, the government runs a deficit of 400 million. In year two, the government runs a deficit of 1 billion. In year three, the government runs a surplus of 200 million. What is the total debt of the government at the end of year three?
Based on the national saving and investment identity, what are the three ways the macroeconomy might react to greater government budget deficits?
What is the main advantage of automatic stabilizers over discretionary fiscal policy?
Under what general macroeconomic circumstances might a government use expansionary fiscal policy? When might it use contractionary fiscal policy?
In a recession, does the actual budget surplus or deficit fall above or below the standardized employment budget?
Assume there is no discretionary increase in government spending. Explain how an improving economy will affect the budget balance and, in turn, investment and the trade balance.
The U.S. government has shut down a number of times In recent history Explain how a government shutdown will affect the variables In the national Investment and savings identity Could the shutdown affect the government budget deficit?
Why is spending by the U.S. government on scientific research at NASA fiscal policy while spending by the University of Illinois is not fiscal policy? Why is a cut in the payroll tax fiscal policy whereas a cut in a state income tax is not fiscal policy?
During the most recent recession, some economists argued that the change in the interest rates that comes about due to deficit spending implied in the demand and supply of financial capital graph would not occur. A simple reason was that the government was stepping in to invest when private firms were not. Using a graph, explain how the use by government in investment offsets the deficit demand.