The Ricardian Equivalence Theorem States That

question 113

Multiple Choice

The Ricardian equivalence theorem states that

• A)an increase in government spending has no effect on aggregate supply.
• B)increases in government spending have a larger impact on real national income than decreases in taxes.
• C)an increase in the government budget deficit created by a current tax cut has no effect on aggregate demand.
• D)an increase in the government budget deficit has no effect on real national income because it only affects the price index.

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