Author Question: Eisenhower's conservative policies were characterized by budget surpluses that produced further ... (Read 29 times)

bobypop · **on:** Jun 30, 2018

Eisenhower's conservative policies were characterized by budget surpluses that produced further declines in price levels.

Indicate whether the statement is true or false

Question 2

Suppose that most government spending was on capital goods that contribute to economic growth. How would that affect the Ricardian equivalence debate?

What will be an ideal response?

maya.nigrin17@yahoo.com · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

False

Answer to Question 2

A key link in the logic of Ricardian equivalence is that tax cuts today must result in tax increases in the future. If instead it is anticipated that economic growth will generate the tax revenue required to repay government debt, then today's decrease in government saving need not be matched by an increase in private saving. Consumption may rise, and some private investment may be crowded out.