If the Government Reduces Current Taxes,government Bonds Increase,and According to Ricardian

question 20

Multiple Choice

If the government reduces current taxes,government bonds increase,and according to Ricardian equivalence in the credit market

• A) the supply curve of private savings shifts to the left to keep the real interest rate constant.
• B) the real interest rate increases.
• C) private savings decreases by an amount equal to the increase in government bonds.
• D) the supply curve of private savings shifts right to keep the real interest rate constant.
• E) the supply curve of private savings shifts to the right and the real interest rate increases.

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Definitions:

Principal

The original sum of money borrowed in a loan, or the amount of money invested excluding earnings or interest.

Gratuitous

Given without receiving any value in return; often refers to acts of kindness or gifts.

Revoke

The action of taking back, withdrawing, or annuling an offer, right, or privilege.

Liability

The condition of having legal accountability for a debt or duty.