The Ricardian Equivalence Theorem Is Correct If Two Assumptions Are

question 31

Multiple Choice

The Ricardian equivalence theorem is correct if two assumptions are true. These assumptions are that people have:

• A)access to savings instruments and recognize the link between deficits and future taxes.
• B)no access to savings instruments and recognize the link between deficits and future taxes.
• C)access to savings instruments but cannot recognize the link between deficits and future taxes.
• D)no access to savings instruments and cannot recognize the link between deficits and taxes.

---

Definitions:

Popular Sovereignty

The principle that the authority of a state and its government is created and sustained by the consent of its people, through elected representatives.

Constitutional Amendment

A formal change or addition to a constitution, often requiring a specific process of proposal and ratification by the government or the people.

Nationwide Election

An election process that occurs across an entire country to select national leaders or to decide on national policies.

Wilmot Proviso

An unsuccessful proposal in 1846 to prohibit slavery in the territory acquired by the United States at the end of the Mexican-American War.