In a Two-Period Model, Holding Everything Else Constant, an Increase

question 64

Multiple Choice

In a two-period model, holding everything else constant, an increase in future taxes

• A)has no effect on the current account surplus, as long as Ricardian equivalence holds.
• B)increases the present value of taxes.
• C)unambiguously decreases the current account surplus.
• D)unambiguously increases the current account surplus.
• E)has an uncertain effect on the current account surplus.

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Definitions:

Recurring Transactions

Transactions that are automatically processed on a scheduled basis, such as monthly bills or subscription fees.

Unscheduled

Not planned or without a predetermined timetable; occurring without a specific schedule in advance.

Reminder

A tool or notice designed to prompt an individual or group about a task or event that is due or needs attention.

Accrued Expenses

Expenses that have been incurred but not yet paid or recorded in the company's ledger.