Distorting Taxes Can Invalidate Ricardian Equivalence Because

question 40

Multiple Choice

Distorting taxes can invalidate Ricardian equivalence because

• A) they confuse consumers about the need for government to repay its debt.
• B) alternative ways of collecting the same tax revenue produce different amounts of lost welfare.
• C) they are inferior to lump-sum taxes.
• D) they are more popular, politically, than lump-sum taxes.
• E) the distortions are only faced by the business sector.

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