-In the Figure Above, the SLF Curve Is the Supply

Multiple Choice

-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, the

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