When a current generation approves a government program that results in a deficit which is paid for through debt, Ricardian Equivalence states: a.Deficit financing and pay-go financing are equivalent as subsidies internalize the debt burden to the current generation. b.Deficit financing and pay-go financing are not equivalent as only taxes internalize the debt burden to the current generation. c.Deficit financing and pay-go financing are equivalent as bequests internalize the debt burden to the current generation.
When a current generation approves a government program that results in a deficit which is paid for through debt, Ricardian Equivalence states: a.Deficit financing and pay-go financing are equivalent as subsidies internalize the debt burden to the current generation. b.Deficit financing and pay-go financing are not equivalent as only taxes internalize the debt burden to the current generation. c.Deficit financing and pay-go financing are equivalent as bequests internalize the debt burden to the current generation.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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When a current generation approves a government program that results in a deficit which is paid for through debt, Ricardian Equivalence states:
a.Deficit financing and pay-go financing are equivalent as subsidies internalize the debt burden to the current generation.
b.Deficit financing and pay-go financing are not equivalent as only taxes internalize the debt burden to the current generation.
c.Deficit financing and pay-go financing are equivalent as bequests internalize the debt burden to the current generation.
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Introduction
The amount of money borrowed by one party from another is referred to as debt. A debt agreement allows the borrowing party to borrow money on the condition that it be repaid at a later date, usually with interest. Simply put, debt is when you borrow money from someone else to pay for something you can't afford.
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