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5) The Ricardian equivalence proposition suggests that a government deficit caused by a tax cut (Hint: look at page 26 of lec
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Answer #1

a) As per the Ricardian proposition the government deficit will not affect the consumption at all, the answer is "D" because people will be expecting an increase in the price in the long run.

b) "D"

increase in the output will increase the income and that will also increase the saving in the market that will shift the saving curve to the right. the answer is "D".

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