According to Ricardian Equivalence, an Increase in Government Expenditure Without

question 113

Multiple Choice

According to Ricardian equivalence, an increase in government expenditure without a proportional tax increase implies that households:

• A) expect future tax increases and will reduce spending today
• B) expect higher current income and will increase spending today
• C) expect future tax decreases and will reduce spending today
• D) expect their income to remain constant and will hold spending constant
• E) do not change their spending patterns

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Definitions:

Nuncupative Wills

Verbal wills made by a person in anticipation of imminent death, and witnessed by others, typically needing to meet specific legal standards to be valid.

Witnesses

Individuals who have directly seen an event, such as a crime or a transaction, and can provide a first-hand account of it.

Statute of Frauds

A legal principle requiring certain contracts to be in writing and signed by all parties involved to be enforceable, typically including contracts for the sale of land, long-term contracts, and contracts for goods over a certain value.

Consumer Debts

Debts incurred by an individual primarily for personal, family, or household purposes, not for business or investment.