To Analyze Ricardian Equivalence Using the Neoclassical Consumption Model, We

question 20

Multiple Choice

To analyze Ricardian equivalence using the neoclassical consumption model, we must:

• A) remove taxes from the present value of wealth
• B) include inflation in the intertemporal budget constraint
• C) treat the discount factor as greater than one
• D) use nominal, rather than real, interest rates
• E) assume marginal utility is constant

---

Definitions:

Habituation

A psychological learning process wherein there is a decrease in response to a stimulus after being repeatedly exposed to it.

Innate Knowledge

Knowledge that is believed to be inborn or naturally present in the mind from birth, as opposed to acquired through experience.

Object Properties

Characteristics of objects that are perceived by the senses, such as shape, color, texture, and size.

Infancy

The stage in human development that spans from birth to 24 months, characterized by rapid physical and cognitive growth.