Given a Reduction in Income Tax Withheld, but No Change

question 29

Multiple Choice

Given a reduction in income tax withheld, but no change in income tax owed, households that act according to Ricardian equivalence would ______ the extra take-home pay, while those facing binding borrowing constraints would ______ the extra-take home pay.

• A) spend; spend
• B) spend; save
• C) save; save
• D) save; spend

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Definitions:

Implied Authority

Power that is not explicitly granted but is assumed to be authorized due to the nature of an individual's position or relationship.

Joint Venture

A business arrangement where two or more parties agree to pool their resources for the purpose of accomplishing a specific task.

Single Project

A single project refers to an undertaking designed to achieve a particular objective within a specified timeframe, typically involving a defined set of resources and tasks.

Co-ownership

A legal arrangement where two or more parties hold property together, sharing rights and responsibilities.