According to the Ricardian Equivalence Proposition,a Government Budget Deficit Created

question 22

Multiple Choice

According to the Ricardian equivalence proposition,a government budget deficit created by a temporary tax cut

• A)does not affect desired national saving.
• B)does not affect expected future taxes.
• C)reduces desired investment spending.
• D)increases the real interest rate.

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Definitions:

Yield-To-Maturity

The total return anticipated on a bond if held until it matures, including all payments and interest.

Tax-Deductible

Expenses that can be subtracted from gross income to reduce the amount of income that is subject to taxation.

Bond Principle

The face value of a bond or the amount that the issuer agrees to pay the bondholder upon the maturity of the bond.

Yield To Maturity

The total return anticipated on a bond if the bond is held until its maturity date, taking into account both interest payments and capital gains or losses.