The theoretical proposition that government deficits do not affect the level of output because individuals realize that they have to pay the deficits in the future, and therefore increase their savings now, is called:

During recent Global Economic Crises, consumers' real wealth in the U.S. declined as a result of

A) the stock market crash, pricking of the housing bubble, and the increased household borrowing. B) the expansionary fiscal policy, and the expansionary monetary policy. C) the lack of fiscal and monetary policy coordination. D) the banks' decision not to issue additional loans.

Suppose the demand for good X can be represented by the following equation: X d = 22 - (1/4)P. Furthermore, suppose that the demand for good Y can be represented by Y d = 50 - P.

(A) Find the elasticity of demand for both good X and good Y when the price is $10. (B) Suppose that an ad valorem tax is placed on both goods. Good Y is taxed at a rate of 5%. To ensure that the inverse elasticity rule holds, what must be the rate at which good X is taxed? Reminder: Elasticity at a given price is found using the formula ? = -(1/S)(P/X), where S is the slope of the demand curve, X is the quantity demanded, and P is the price.