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) exactly equal to $2 billion dollars
B) more than $2 billion
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.
Ans: D) No crowding out occurs and investment does not change.
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