If Government Spending Is Held Constant and Ricardian Equivalence Holds

question 22

Multiple Choice

If government spending is held constant and Ricardian equivalence holds,

• A) an increase in the government budget deficit is always matched by a reduction in private savings.
• B) an increase in government savings is always matched by an increase in the government budget deficit.
• C) an increase in government savings is always matched by an equal increase in private savings.
• D) an increase in government savings is always matched by an equal reduction in private savings.
• E) an increase in government savings is always matched by an increase in the real interest rate.

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Definitions:

Paralytic Ileus

A condition where there is a lack of movement in the intestines that can cause a build-up and potential blockage of food material, leading to a temporary stop in bowel movements.

Stomatitis

An inflammation of the mouth and lips, which can cause redness, swelling, pain, and sometimes sores in the oral cavity.

Volvulus

A medical condition in which a loop of the intestine twists around itself and the mesentery that supports it, causing an intestinal blockage.

Gastroesophageal Reflux Disease

A chronic digestive disease in which stomach acid or bile irritates the food pipe lining.