Ricardian equivalence refers to
a. the equivalence of taxes and revenues in fiscal policy.
b. the fact the households incorporate inflationary expectations in calculating interest payments.
c. the equivalence of imports and exports in an open economy.
d. the possibility that households may say save now so that they can pay the higher taxes later if there is a tax cut at the present time which drives up future interest payments.
e. none of the above.
D
You might also like to view...
Your roommate is having trouble grasping how monetary policy works. Which of the following explanations could you use to correctly describe the mechanism by which the Fed can affect the economy through monetary policy? Increasing the money supply
A) causes people to spend more because they know prices will rise in the future. B) lowers the interest rate, raises the value of the dollar, lowers the prices of exports, and raises net exports. C) lowers the interest rate, and firms increase investment spending. D) raises the interest rate and consumers decrease spending on durable goods.
Answer the following statements true (T) or false (F)
1. The CPI measures price changes for only about two-thirds of all spending. 2. The GDP Implicit Price Defoliator is the broadest index of price changes. 3. The PPI is an index of the price level of aggregate output. 4. Check able deposits are counted as part of the U.S. money supply. 5. Savings deposits are not counted as part of the M1 measure of the U.S. money supply.