Author Question: In the late 1990s, debt-financed government spending decreased in Mexico. Following this decrease, ... (Read 218 times)

Alygatorr01285 · **on:** Jun 30, 2018

In the late 1990s, debt-financed government spending decreased in Mexico. Following this decrease, consumption spending increased. Ricardian equivalence would explain this increase in consumption as the result of:
a. people's expectation of higher future taxes required to pay off government debt.
b. people's expectation of lower future taxes that induce them to save less.
c. automatic stabilization of the economy.
d. the crowding out effect.
e. an increase in current household disposable income.

Question 2

According to the law of supply, when the price of a good increases we would predict that:
a. less will be produced.
b. less will be consumed.
c. more will be produced.
d. more will be consumed.