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In: Economics

The Ricardian equivalence proposition suggests that a government deficit caused by a tax cut (a) causes...

The Ricardian equivalence proposition suggests that a government deficit caused by a tax cut

(a) causes inflation.

(b)causes a current account deficit.

(c) raises interest rates.

(d) doesn’t affect consumption.

Solutions

Expert Solution

Ans) the correct option is d) doesn’t affect consumption.

Ricardian Equivalence theorem suggests that a change in the timing of taxes has no effect on consumption

Rahul Sunny answered 2 years ago
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