If the Ricardian Equivalence Proposition Is Correct, Then

question 18

Multiple Choice

If the Ricardian equivalence proposition is correct, then:

• A) deficits stimulate the economy in the short run.
• B) deficits stimulate the economy in the medium run.
• C) deficits have no effects on economic activity.
• D) deficits harm future generations.
• E) deficits reduce investment spending.

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Definitions:

Income Summary

An account in which revenues and expenses are summarized, used in the closing process to prepare the accounts for the next period.

Net Loss

The amount by which total expenses exceed total revenues for a business, indicating a financial loss over a specific period.

Capital

The financial resources that businesses use to fund their operations and growth.

Closing Process

The final steps in the accounting cycle used to update the financial records for the period's revenues, expenses, and dividends to prepare for the next accounting period.