Suppose the government has a budget surplus. Then
A) private saving is less than investment and government saving is positive.
B) private saving is greater than investment and government saving is positive.
C) private saving is greater than investment and government saving is negative.
D) private saving is equal to investment.
E) private investment is greater than the sum of government saving and private saving.
Question 2
In the short run, when the Fed increases the federal funds rate,
A) the real interest rate rises and investment does not change.
B) the real interest rate is unaffected but investment still decreases.
C) the real interest rate rises and investment decreases.
D) there is no effect on investment because investment depends on the real interest rate.
E) the real interest rate falls and investment increases.
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