The Barro-Ricardo Equivalence Proposition Implies That Tax Cuts

question 11

Multiple Choice

The Barro-Ricardo equivalence proposition implies that tax cuts

• A)always lead to a reduction in the budget deficit
• B)always lead to the crowding out of investment spending
• C)that lead to higher budget deficits do not stimulate consumption since people will save in anticipation of future tax increases
• D)provide important incentives for economic growth
• E)ease people's liquidity constraints so they consume more

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Definitions:

Cognitive-Dissonance Theory

The view that we are motivated to make our cognitions or beliefs consistent with each other and with our behavior.

Effort Justification

In cognitive-dissonance theory, the tendency to seek justification (acceptable reasons) for strenuous efforts.

Self-Serving Bias

The tendency to view one’s successes as stemming from internal factors and one’s failures as stemming from external factors.

Sternberg's Triangular Model

A theory of love suggesting that intimacy, passion, and commitment are the three components that define all human love relationships.