When There Are Credit Market Frictions,Ricardian Equivalence May Not Hold

question 7

Multiple Choice

When there are credit market frictions,Ricardian equivalence may not hold because

• A) consumers cannot understand the implications of the government budget constraint.
• B) a tax cut in the present with a future increase in taxes works effectively like a loan.
• C) an increase in government saving is matched one-for-one by a decrease in private saving.
• D) social security is fully-funded.

---

Definitions:

Huntington's Disease

Huntington's Disease is a hereditary neurodegenerative disorder characterized by progressive brain cell death, leading to motor control, cognitive decline, and behavioral symptoms.

Triplet Repeat

A sequence of three nucleotides in DNA that is repeated multiple times in a row, which can lead to genetic disorders if the number of repeats exceeds a normal range.

Inborn Errors

Genetic disorders resulting from a defect in an enzyme, leading to metabolic problems.

Metabolism

The set of life-sustaining chemical reactions in organisms for converting food into energy.