The New Classical View of Budget Deficits Assumes That

question 69

Multiple Choice

The new classical view of budget deficits assumes that

• A)people view government bonds as an addition to their wealth.
• B)individuals do not anticipate the tax liability implied by deficit spending.
• C)increased government borrowing will raise the interest rate and retard private borrowing and capital formation.
• D)if future taxes (debt)are substituted for current taxes,people will save the reduction in current taxes in order to pay the higher future taxes.

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