Ricardian Equivalence Refers to

question 3

Multiple Choice

Ricardian equivalence refers to

• A) the equivalence of taxes and revenues in fiscal policy.
• B) the fact the households incorporate inflationary expectations in calculating interest payments.
• C) the equivalence of imports and exports in an open economy.
• D) the possibility that households may say save now so that they can pay the higher taxes later if there is a tax cut at the present time which drives up future interest payments.
• E) none of the above.

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Definitions:

Lowest Terms

The simplest form of a fraction, where the numerator and denominator are reduced to their smallest values through common factor division.

Ratio

A ratio indicating how often one number can encompass or be encompassed by another value.

Unknown Quantities

Refers to amounts or numbers that are not specifically known or determined.

Proportion

An installment, section, or count contemplated in proportion to its total mass.