The Ricardian Equivalence Proposition Suggests That a Government Deficit Caused

question 7

Multiple Choice

The Ricardian equivalence proposition suggests that a government deficit caused by a tax cut

• A)causes inflation.
• B)causes a current account deficit.
• C)raises interest rates.
• D)doesn't affect consumption.

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Definitions:

Save Money

The practice of reducing expenditures or setting aside funds to increase financial security or for future use.

Net Present Value

Net Present Value (NPV) is a financial metric that calculates the present value of all cash flows associated with a project, including both inflows and outflows, to determine its profitability.

Interest Rate

The percentage at which interest is paid by a borrower for the use of money that they borrow from a lender.

Conglomerate

A large corporation that owns a collection of different companies in various sectors or industries.