According to the Ricardo- Barro Effect

question 1

Multiple Choice

According to the Ricardo- Barro effect,

• A)taxpayers fail to foresee that government deficits imply higher future taxes.
• B)households increase their personal saving when governments run budget deficits.
• C)government deficits raise the real interest rate.
• D)government budget deficits increase households' expected future disposable income.

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Definitions:

Income Distribution

The way in which total income is shared among the population or different groups within the society.

Equilibrium Value

The price and quantity at which the supply and demand for a good or service balance each other out.

VMPL Curve

The VMPL curve, or the Value of Marginal Product of Labor curve, represents the additional value created by employing one more unit of labor, holding other inputs constant.

Market Wage Rate

The prevailing rate of pay for a specific job in the competitive labor market, determined by supply and demand for labor.