According to the Ricardian Equivalence Theorem, People Increase Savings Today

question 78

Multiple Choice

According to the Ricardian equivalence theorem, people increase savings today when the government increases deficits because they recognize that:

• A)government deficits imply higher future taxes.
• B)government deficits imply lower future taxes.
• C)consumption reduces future taxes.
• D)consumption increases future taxes.

---

Definitions:

Intragroup Services

Services provided by one entity within a corporate group to another entity within the same group.

Statement of Financial Position

A financial statement that reports a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a basis for computing rates of return and evaluating its capital structure.

Identifiable Assets

Identifiable assets are those assets of an acquired company that can be separated from the company and sold, transferred, licensed, rented, or exchanged, including assets that can be contractually used or shared.

Contingent Liabilities

Possible liabilities that depend on the outcome of a future event, not recognized as liabilities on the balance sheet unless both probable and measurable.