According to the Theory of Ricardian Equivalence, Tax Cuts Combined

question 73

Multiple Choice

According to the theory of Ricardian equivalence, tax cuts combined with no plans to reduce government spending ______ public saving and ______ private saving.

• A) reduce; reduce
• B) reduce; increase
• C) increase; increase
• D) increase; reduce

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Definitions:

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity available for its day-to-day operations.

Long-term Liabilities

Financial obligations of a business that are due more than one year in the future, such as bonds payable or long-term loans.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year.

Current Liabilities

Financial obligations a company is required to pay within one year, such as accounts payable and short-term loans.