Choose the Statement That Is Incorrect

Multiple Choice

Choose the statement that is incorrect.

A) According to the Ricardo-Barro effect, taxpayers are rational people who know that a budget deficit today means that future taxes will be higher and future disposable incomes will be smaller.
B) According to the Ricardo-Barro effect, a budget deficit has no effect on either the real interest rate or investment.
C) Most economists believe that the Ricardo-Barro effect holds in the market for loanable funds.
D) According to the Ricardo-Barro effect, the quantity of loanable funds demanded increases when a government budget deficit occurs, and private saving and the private supply of loanable funds increase to match the quantity of loanable funds demanded.
E) All of the above statements are correct.