The Implication of Ricardian Equivalence Is That If the Government

question 4

Multiple Choice

The implication of Ricardian equivalence is that if the government increases expenditures without increasing taxes, the increase in government expenditures will be:

• A) at least partially offset by a reduction in consumer spending.
• B) enhanced by an increase in consumer spending.
• C) more than offset by a reduction in firm spending.
• D) enhanced by the multiplier effect.
• E) instantly offset by automatic stabilizers.

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Definitions:

P-values

A numerical measure that helps in determining the significance of results obtained in statistical hypothesis testing, indicating the probability of obtaining test results at least as extreme as the ones observed during the test, assuming that the null hypothesis is true.

Z-score

A numerical metric indicating how a value compares to the average of a set of values, shown by the number of standard deviations it is from the average.

P-value

The probability of observing a statistic as extreme as, or more extreme than, the observed value under the null hypothesis.

Hypothesis Test

An analytical technique in statistics that uses data gathered from a small group to investigate a claim about a characteristic of the larger population.