The Barro-Ricardo Equivalence Proposition

question 10

Multiple Choice

The Barro-Ricardo equivalence proposition

• A)states that debt-financing merely postpones taxation and therefore in many instances is equivalent to current taxation
• B)relies on the absence of liquidity constraints and the presence of an operational bequest motive
• C)implies that a cut in current taxes that carries with it an implied increase in future taxes will lead to an increase in private saving
• D)was not supported by events of the 1980s as taxes were cut, budget deficits increased, and private saving declined
• E)all of the above

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Definitions:

Cast Spoke Wheel

A type of wheel constructed by casting methods, featuring spokes as part of its design for strength and reduced weight.

Maximum Permitted

Refers to the highest allowable limit or level for a particular parameter, such as weight, speed, or capacity.

Runout

Any kind of wobble in a rotating component. Runout may be axial or radial. Using the example of a wheel on a vehicle, axial runout would be wobble as viewed from the front or rear of the vehicle, and radial runout would be wobble viewed from the side of the vehicle.

Tire Blow-Outs

Sudden failures of a tire due to excessive pressure, impact damage, or weakness in the tire structure, often leading to loss of vehicle control.