If People Are Finite-Lived, Ricardian Equivalence Can Fail Because

question 45

Multiple Choice

If people are finite-lived, Ricardian equivalence can fail because

• A) lifetime wealth will change for those currently alive.
• B) people cannot predict the future.
• C) this implies taxes must be distorting.
• D) there is intragenerational redistribution.
• E) people make bequests.

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Definitions:

Consumer Surplus

The disparity between the total sum consumers are ready to pay for a product or service and the actual amount they end up spending.

Producer Surplus

The difference between what producers are willing to accept for a good or service and the actual price they receive, reflecting extra benefit or profit.

Tax

Compulsory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.

Deadweight Loss

The reduction in economic productivity resulting from a failure to reach or the impossibility of reaching the market equilibrium for a particular product or service.