Suppose the Government Has a Budget Deficit of $2 Billion

Multiple Choice

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) some crowding out occurs, but less than $2 billion
C) exactly equal to $2 billion dollars
D) no crowding out occurs and investment does not change
E) no crowding out occurs because investment increases by $2 billion