Distorting Taxes Can Invalidate Ricardian Equivalence Because

question 33

Multiple Choice

Distorting taxes can invalidate Ricardian equivalence because

• A) they confuse consumers about the need for government to repay its debt.
• B) alternative ways of collecting the same tax revenue produce different amounts of lost welfare.
• C) they are inferior to lump-sum taxes.
• D) they are more popular, politically, than lump-sum taxes.
• E) the distortions are only faced by the business sector.

---

Definitions:

Top-Down

An approach or process that starts from the general to the specific, often used in information processing or organizational decision-making.

Bottom-Up

An approach or process that begins with specific details or elements and builds up to a comprehensive picture or understanding.

Feature Analysis

The process of breaking down and examining the elements or structure of information, often used in cognitive psychology to understand how people recognize patterns and objects.

Processing

In psychology, refers to the operations carried out by the brain to interpret and organize sensory information into meaningful patterns.