Suppose the government has a budget deficit of $2 billion. If the Ricardo

-

Barro effect is correct,

then how much crowding out of investment occurs?

A)

more than $2 billion

B)

exactly equal to $2 billion dollars

C)

some crowding out occurs, but less than $2 billion

D)

No crowding out occurs and investment does not change.

E)

No crowding out occurs because investment increases by $2 billion