If the Ricardian Equivalence Proposition Is Correct,then an Increase in the Deficit

question 28

Multiple Choice

If the Ricardian equivalence proposition is correct,then an increase in the deficit will lead to

• A)an increase in private saving.
• B)a decrease in investment spending.
• C)a lower standard of living in the future.
• D)all of the above
• E) none of the above

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Definitions:

Held To Maturity

A classification for financial securities which the holder intends and is able to keep until they mature.

Effective Yield

A measure of the return on an investment, accounting for the effect of compounding interest more accurately than nominal yield.

Interest Revenue

Income earned by a company for lending money or allowing another entity to use its funds, reported on the income statement.

Temporary Decline

A short-term decrease in the value of an asset or market without indication of a prolonged downturn.