Ricardian Equivalence Argues That When the Government Cuts Taxes and Raises

question 25

Multiple Choice

Ricardian equivalence argues that when the government cuts taxes and raises its deficit,

• A) consumers anticipate that they will face lower taxes later to pay for the resulting government debt.
• B) consumers anticipate that they will higher services from the government.
• C) consumers anticipate that they will face higher taxes later to pay for the resulting government debt.
• D) consumers anticipate it will affect their future taxes, in general in the direction of lowering future taxes.
• E) consumers anticipate that the low tax rates will continue.

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Definitions:

Types of Motivational Conflicts

The differing internal struggles an individual faces when choosing between two competing desires or needs.

Placebo Effect

A phenomenon where a person experiences a physiological or psychological improvement after receiving a treatment that has no therapeutic value.

Motivational Conflict

Refers to situations where two or more incompatible motivations or behavioral impulses compete for expression.

Prom Dresses

Special formal dresses worn by students attending their high school prom, a significant social and cultural event in many parts of the world.