Which of the Following Correctly Explain Ricardian Equivalence

question 29

Multiple Choice

Which of the following correctly explain Ricardian equivalence?

• A)Government spending that is financed by borrowing has a smaller effect on the economy than government spending financed by raising taxes.
• B)Consumers do not base current spending on future expected tax liabilities.
• C)Government borrowing can function like increased current taxes, reducing current household and business expenditures.
• D)The government should balance its budget by equating revenue and expenditure in every fiscal year.
• E)Government spending does not crowd out private investment.

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