An Expansionary Fiscal Policy Will NOT Cause an Increase in the Price

question 86

Multiple Choice

An expansionary fiscal policy will NOT cause an increase in the price level if the government

• A)reduces the corporate income tax rate.
• B)increases purchases in the classical model.
• C)lowers taxes and Ricardian equivalence does not hold.
• D)lowers taxes and Ricardian equivalence holds.

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Definitions:

Equilibrium

A state in which supply and demand are balanced, often referring to market equilibrium in economics.

Potential Buyers

Individuals or entities who have shown interest or have the capability to purchase a product or service but have not yet made the purchase.

Rustbucket

A derogatory term for a vehicle or ship that is old, in poor condition, and often rusty.

Used Cars

Pre-owned vehicles that have been previously registered and are available for sale, often at a lower price than new cars.