According to the Ricardian equivalence theorem, a tax cut that increases the government budget deficit will have
A. no effect on aggregate demand because people realize that there will be a future tax liability so that there is no increase in consumption expenditures.
B. a positive effect on aggregate demand because people look at changes in taxes or government spending in the present.
C. no effect on aggregate demand because people only look at changes in taxes or government spending in the present.
D. an effect on aggregate demand. The magnitude the effect will have depends upon whether the increase is caused by a reduction in taxes or an increase in government spending.
Answer: A
You might also like to view...
Activists believe that
a. discretionary changes in macroeconomic policy can help smooth the ups and downs of the business cycle. b. balancing the federal budget is of primary importance to economic stability. c. the economy's self-correcting mechanism, if not stifled by perverse policies, will prevent prolonged periods of high unemployment. d. the M1 money supply should be increased at a steady annual rate.
When we speak of the Fed's responsibility to supervise member banks, we are saying that the
A) Fed's advisory board will help member banks manage their assets and liabilities. B) Fed's Open Market Committee will advise member banks regarding the purchase and sale of government securities. C) Fed's Board of Governors will advise member banks regarding the appropriate interest rates to be charged on various loans. D) Fed will advise member banks regarding the nature of loans and compliance with regulations. E) Fed will advise member banks about the proper control of each individual bank's money supply.
Which statement concerning powers granted the President of the United States by the Taft-Hartley Act is TRUE?
A) The President can obtain an injunction that will stop a strike, if the strike involves government workers only. B) The President can require management to negotiate with a union and if the firm's management refuses, the President can appoint an arbitrator to resolve the conflict. C) The President can obtain an injunction that will stop a strike for an eighty-day "cooling off" period if the strike is expected to imperil national safety or health. D) The President can obtain an injunction that will stop a strike indefinitely.
Fixed costs are best defined as costs ____________ with the firm's output level over some period.
A. that will not vary B. which vary directly C. which vary inversely