In the figure above, the SLF curve is the supply of loanable funds curve and the PSLF curve is the private supply of loanable funds curve. If there is no Ricardo-Barro effect and the government now runs a balanced budget,

A) the interest rate will increase from 4 percent to 6 percent.
B) there is a surplus of investment funds and the interest rate falls to 4 percent.
C) there is shortage of investment funds of $0.4 trillion.
D) the equilibrium interest rate is 6 percent and investment is $1.6 trillion.
E) the equilibrium interest rate is 4 percent and investment is $1.8 trillion.


D

Economics

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