Author Question: Ricardian equivalence argues that when the government cuts taxes and raises its deficit, A) ... (Read 78 times)

rmenurse · **on:** Jun 30, 2018

Ricardian equivalence argues that when the government cuts taxes and raises its deficit,

A) consumers anticipate that they will face lower taxes later to pay for the resulting government debt.
B) consumers anticipate that they will higher services from the government.
C) consumers anticipate that they will face higher taxes later to pay for the resulting government debt.
D) consumers anticipate it will affect their future taxes, in general in the direction of lowering future taxes.
E) consumers anticipate that the low tax rates will continue.

Question 2

In the specific factor model, the effect of an increase in the productivity of labor in the production of food will cause a(an) ________ in the quantity of labor used to produce cloth, a(an) ________ in the quantity of labor used to produce food and

a(an) ________ in the wage rate. A) decrease; increase; increase
B) increase; decrease; increase
C) increase; decrease; decrease
D) decrease; increase; no change
E) increase; increase; no change