The Difference Between Crowding Out and Ricardian Equivalence Is

question 13

Multiple Choice

The difference between crowding out and Ricardian equivalence is

• A) crowding out is only caused by government purchases; Ricardian equivalence results only from tax cuts
• B) crowding out occurs because interest rates rise; under Ricardian equivalence interest rates fall
• C) crowding out shifts the IS curve outward; Ricardian equivalence shifts the LM curve inward
• D) crowding out makes monetary policy ineffective; Ricardian equivalence makes fiscal policy ineffective
• E) crowding out occurs if tax cuts are spent; Ricardian equivalence occurs if they are saved

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Definitions:

China

China is a country in East Asia, known for being the world's most populous country and having one of the oldest civilizations. It has a mixed socialist market economy and is a major player in global affairs.

Trickle-Down Theory

The assertion that stimulating overall economic growth will ultimately help the poor.

Economic Growth

An increase in the production of economic goods and services, compared from one period of time to another, and often measured by GDP (Gross Domestic Product).

Wealth Flows

The movement of financial resources and assets between individuals, families, or countries, impacting economic stability and development.