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:
A. purchasing power parity.
B. functional finance.
C. sound finance.
D. the Ricardian equivalence theorem.
Answer: D
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If good B is a complement to good A, then a decrease in the price of B
a. increases the quantity demanded of A b. decreases the demand for A c. increases the demand for A d. decreases the quantity demanded of A e. will cause the demand for B to increase
Using present-value analysis, an economist will argue that we do not have to worry about loggers harvesting young trees on private land
A. because it is not profitable for them to engage in any logging. B. because logging companies do not attempt to maximize profit. C. because young trees have no market value. D. because it is more profitable for them to let the young trees grow.
International data suggests that
a. convergence is not taking place. b. convergence is taking place among poor countries but not among rich countries. c. convergence is taking place among all countries. d. convergence is taking place among rich countries but not among poor countries.
A U.S. firm opens a factory that produces power tools in Korea
a. This increases U.S. net capital outflow and decreases Korean net capital outflow. b. This decreases U.S. net capital outflow and increases Korean net capital outflow. c. This increases only U.S. net capital outflow. d. This increases only Korean net capital outflow.