According to the Ricardian Equivalence Theorem, Budget Deficits Resulting from Tax

question 128

Multiple Choice

According to the Ricardian equivalence theorem, budget deficits resulting from tax cuts

• A) increase aggregate demand.
• B)decrease aggregate demand.
• C)have no effect on aggregate demand.
• D)affect only aggregate supply.

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Definitions:

Production Possibilities Curve

A graphical representation that shows the maximum possible output combinations of two goods or services an economy can achieve when all resources are fully employed.

Market Prices

The amounts at which goods and services can be bought or sold in open markets.

Resource Substitutability

The degree to which different inputs (or resources) can be substituted for one another in the production process.

Economic Resource

Any good or service that can be used to produce other goods and services, including labor, land, capital, and entrepreneurship.