Question 1

Compare the traditional view versus the view of Ricardian equivalence of the effects of a debt-financed tax cut on:
a. national saving;
b. current consumption;
c. the real interest rate.

Accepted Answer

a. Traditional view: national saving dec...

Question 2

According to the traditional view, a tax cut without a cut in government spending:

Accepted Answer

A)  raises consumption in both the short run and the long run.
B)  lowers consumption in both the short run and the long run.
C)  raises consumption in the short run but lowers it in the long run.
D)  lowers consumption in the short run but raises it in the long run.

Question 3

A debt-financed tax cut will saving in the traditional view and saving in the view of Ricardian equivalence.

Accepted Answer

A)  increase; increase
B)  decrease; decrease
C)  decrease; increase
D)  decrease; not change

Question 4

If the government debt, D, equals $5 trillion, the nominal interest rate is 7 percent, and the real interest rate is 3 percent, then nominal budget deficit overstates the real deficit by $ trillion.

Accepted Answer

A)  0.35
B)  0.20
C)  0.15
D)  0.07

Exam 14: Government Debt and Budget Deficits

A debt-financed tax cut will saving in the traditional view and saving in the view of Ricardian equivalence.

Correct Answer
verified

If the government debt, D, equals $5 trillion, the nominal interest rate is 7 percent, and the real interest rate is 3 percent, then nominal budget deficit overstates the real deficit by $ trillion.

Correct Answer
verified

Compare the traditional view versus the view of Ricardian equivalence of the effects of a debt-financed tax cut on: a. national saving; b. current consumption; c. the real interest rate.

Correct Answer
verified
a. Traditional view: national saving dec...
View Answer

According to the traditional view, a tax cut without a cut in government spending:

Correct Answer
verified

Exam 14: Government Debt and Budget Deficits

A debt-financed tax cut will saving in the traditional view and saving in the view of Ricardian equivalence.

Correct AnswerverifiedShow Answer

If the government debt, D, equals $5 trillion, the nominal interest rate is 7 percent, and the real interest rate is 3 percent, then nominal budget deficit overstates the real deficit by $ trillion.

Correct AnswerverifiedShow Answer

Compare the traditional view versus the view of Ricardian equivalence of the effects of a debt-financed tax cut on: a. national saving; b. current consumption; c. the real interest rate.

Correct Answerverifieda. Traditional view: national saving dec...View AnswerShow Answer

According to the traditional view, a tax cut without a cut in government spending:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a. Traditional view: national saving dec...
View Answer

Correct Answer
verified