If taxes are reduced, will most people save more or less than before? Does national saving rise or fall? Explain.
What will be an ideal response?
Question 2
In a two-period model, holding everything else constant, an increase in future taxes
A) unambiguously increases the current account surplus.
B) unambiguously decreases the current account surplus.
C) has an uncertain effect on the current account surplus.
D) has no effect on the current account surplus, as long as Ricardian equivalence holds.