Choose the Statement That Is Incorrect

question 29

Multiple Choice

Choose the statement that is incorrect.

• A)According to the Ricardo-Barro effect, taxpayers are rational people who know that a budget deficit today means that future taxes will be higher and future disposable incomes will be smaller.
• B)According to the Ricardo-Barro effect, a budget deficit has no effect on either the real interest rate or investment.
• C)Most economists believe that the Ricardo-Barro effect holds in the market for loanable funds.
• D)According to the Ricardo-Barro effect, the quantity of loanable funds demanded increases when a government budget deficit occurs, and private saving and the private supply of loanable funds increase to match the quantity of loanable funds demanded.
• E)All of the above statements are correct.

---

Definitions:

Comparative Financial Statements

Financial reports that provide information for multiple periods, typically side by side, allowing for an easier analysis of financial performance over time.

Single-Year Statements

Financial statements or reports that cover a one-year period or fiscal year, providing a snapshot of a company's financial activity and position.

Price/Earnings

Also known as the P/E ratio, this measures a company's current share price relative to its per-share earnings.

Profit Margin

A financial metric expressing the percentage of income that remains as profit after all expenses, including taxes, are subtracted from total revenues.