Suppose taxes increase in the current period and there is no change to current or future government expenditures. What does Ricardian equivalence predict will be the impact on consumption decisions?
Suppose taxes increase in the current period and there is no change to current or future government expenditures. What does Ricardian equivalence predict will be the impact on consumption decisions?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Suppose taxes increase in the current period and there is no change to current or future government
expenditures. What does Ricardian equivalence predict will be the impact on consumption decisions?
(a) Decrease in current consumption and a decrease in saving
(b) Decrease in future consumption and an increase in future consumption
(c) No change in current consumption and a decrease in future consumption
(d) No change in consumption and a decrease in saving.
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