Figure shows the market for loanable funds. The government is running a budget surplus of $900 billion.

Question:

a. Show the effect of a $400 billion decrease in the government budget surplus if there is no Ricardo-Barro effect. How much investment is crowded out by the fall in the surplus?
b. How does the Ricardo-Barro effect change the results?

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Macroeconomics Canada in the Global Environment

ISBN: 978-0321778109

8th edition

Authors: Michael Parkin, Robin Bade

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Question Posted: Dec 19, 2015 04:54 AM

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Figure shows the market for loanable funds. The government is running a budget surplus of $900 billion.

Question:

SLF DLF 1.6 18 2.0 2 2.4 Loanable funds (trillions of 2002 dollars per year)

Step by Step Answer:

a Figure shows the effect of the 400 billion decrease in the government surplus The government defic...View the full answer

Macroeconomics Canada in the Global Environment

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