Ricardian Equivalence

question 244

Multiple Choice

Ricardian equivalence:

• A) will occur more when consumers practice consumption smoothing.
• B) does not occur when a political administration is set to change.
• C) has not occurred in the United States.
• D) is less significant when consumers deem tax cuts or rebates as permanent.

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Definitions:

Public Saving

The difference between the government's tax revenues and its spending, excluding debt interest.

Tax Revenue

The income that is gained by governments through taxation.

Government Spending

Expenditures by the government sector on goods and services, including infrastructure, education, defense, and healthcare, impacting an economy's aggregate demand.

Budget Deficit

A situation where a government's expenditures exceed its revenues within a specific fiscal period, leading to borrowing or debt accumulation.