Macroeconomics (Fourth Edition)
4th Edition
ISBN: 9780393603767
Author: Charles I. Jones
Publisher: W. W. Norton & Company
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Question
Chapter 16, Problem 6E
a)
To determine
Ricardian equivalence applied in this case and consumption respond according to the argument.
b)
To determine
Show the answer change if some individuals borrowing constrained.
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Students have asked these similar questions
1. Answer both parts (a) and (b).
(a) Explain the Ricardian Equivalence Theorem
using a two period model of consumption.
Explain in detail.
(b) Is the Ricardian Equivalence Theorem likely
to hold in practice? Explain in detail.
2. Answer both parts (a) and (b).
(a) What does r>g mean? Explain in detail.
(b) How does it help explain the recent
evolution of income inequality? Explain in
detail.
Scenario 3: Initially, the government's budget is balanced; then the government significantly increases spending on national defense without changing
taxes.
This change in spending causes the government to run a budget
which
national saving.
Shift the appropriate curve on the graph to reflect this change.
This causes the interest rate to
the level of investment spending.
Give written answer with explanation and conclusion
A government policy that would reduce the saving rate is ?
a) giving tax breaks to increase the real return that savers receive
b) eliminating the social security system
c) increasing the government budget surplus by cutting government spending
d) switching the tax system to tax consumption instead of income
Chapter 16 Solutions
Macroeconomics (Fourth Edition)
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