The Ricardian equivalence theorem suggests that an increase in the government budget deficit created by a tax cut will
A) decrease real Gross Domestic Product (GDP) in the short run, but increase it in the long run.
B) decrease real Gross Domestic Product (GDP) in both the short and long run.
C) increase real Gross Domestic Product (GDP) in both the short and long run.
D) have no effect on aggregate demand.
D
You might also like to view...
The difference between price and average total cost is
A) total costs. B) marginal costs. C) average profit. D) an irrelevant quantity.
According to the text, the allocation of scarce health care resources should be:
A. based on the willingness to pay of the recipient of the care. B. determined by weighing marginal costs and marginal benefits. C. determined by length of time on a waiting list. D. based on the degree of suffering of the recipient of the care.
Assume that the federal government wishes to counteract inflation with a policy that has the smallest impact on the federal budget. Which of the following would you recommend?
A. Increase transfer payments. B. Increase government purchases. C. Decrease government purchases. D. Decrease transfer payments. E. Increase personal income taxes.
Suppose the U.S. economy is going into a recession. Considering the effect of monetary policy on trade through its impact on income only, the domestic problem calls for:
A. contractionary monetary policy, which will decrease the U.S. trade deficit. B. expansionary monetary policy, which will increase the U.S. trade deficit. C. expansionary monetary policy, which will decrease the U.S. trade deficit. D. contractionary monetary policy, which will increase the U.S. trade deficit.