Suppose that most government spending was on capital goods that contribute to economic growth. How would that affect the Ricardian equivalence debate?
What will be an ideal response?
A key link in the logic of Ricardian equivalence is that tax cuts today must result in tax increases in the future. If instead it is anticipated that economic growth will generate the tax revenue required to repay government debt, then today's decrease in government saving need not be matched by an increase in private saving. Consumption may rise, and some private investment may be crowded out.
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As disposable income ________ planned consumption expenditure ________
A) decreases; increases B) increases; decreases C) decreases; remains the same, since it is autonomous expenditure D) increases; increases E) increases; changes only if net taxes also change
According to economic analysis, while making a decision, an individual compares the benefits expected from one option with the benefits expected from other options
a. True b. False Indicate whether the statement is true or false
Suppose labor productivity differences are the only determinants of comparative advantage, and Brazil and Chile both produce only coffee and sugar. In Chile, either 5 units of coffee or 2 units of sugar can be produced in one day. In Brazil, a day of labor produces either 2 units of coffee or 1 unit of sugar. What is the opportunity cost of producing coffee in Chile?
a. Half a pound of sugar b. Two-fifth of a pound of sugar c. 2 pounds of sugar d. One-third of a pound of sugar e. 4 pounds of sugar
Which of the following characteristics does a public good have?
a. Nonexcludable and rival b. Excludable and rival c. Non-excludable and nonrivalrous d. Excludable and nonrivalrous