During the early 20th century, economists who held that the Ricardian equivalence theorem was theoretically true could support either sound or functional finance.
Answer the following statement true (T) or false (F)
True
Holding the Ricardian equivalence theorem to be theoretically true does not entail accepting that deficits do not affect output in the short run. Therefore, one was still free to support functional finance, which says that the government should make the decision whether to run a deficit based on its effect on the economy. In addition, sound finance is a moral position that was based primarily on political grounds. Therefore, supporting that view doesn't depend on whether one holds the Ricardian equivalence theory to be theoretically true or not.
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Adam Smith, the father of modern economics wrote in his book, An Inquiry into the Nature and Causes of the Wealth of Nations, "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner but from their regard to
their own interest." Explain what he meant by that statement and how such behavior promotes the wealth of a nation.
The marginal tax rate shows
A) the percentage of income which a typical family pays in tax. B) the average rate of taxation in the economy. C) the deductions which are permitted for child care and medical expenses. D) the extra tax due on an extra dollar of income.