In the Two-Period SOE Model

question 29

Multiple Choice

In the two-period SOE model

• A)the consumption of the government and private consumers is treated as a national choice.
• B)Ricardian equivalence does not hold.
• C)there is no trade with the outside world.
• D)there is no government.
• E)government spending is exogenous.

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Definitions:

Weak Axiom

In economic theory, a principle stating that if a consumer prefers bundle A to bundle B, then they will not prefer B to A when prices change, keeping income constant.

Revealed Preference

A theory suggesting that consumers' preferences can be determined by observing their purchasing behavior and the choices they make among different goods.

Weak Axiom

In the context of consumer choice theory, it is a postulate stating that if a consumer prefers bundle A over bundle B when both are affordable, then she will not choose B when A becomes more affordable.

Revealed Preferences

The theory that consumers' preferences can be determined by their purchasing habits and behavior rather than through their expressed desires or responses to surveys.