What are the effects of a tax cut on consumption and savings in the presence of credit market imperfections? Does the Ricardian equivalence hold? and savings With a current tax cut, consumption. hold. increases by less than the amount of the tax cut, decreases by the entire amount of the tax cut, does not change, decreases by more than the amount of the tax cut, decreases by less than the amount of the tax cut, increases by more than the amount of the tax cut, increases by the entire amount of the tax cut, in the presence of credit market imperfections. The Ricardian equivalence
What are the effects of a tax cut on consumption and savings in the presence of credit market imperfections? Does the Ricardian equivalence hold? and savings With a current tax cut, consumption. hold. increases by less than the amount of the tax cut, decreases by the entire amount of the tax cut, does not change, decreases by more than the amount of the tax cut, decreases by less than the amount of the tax cut, increases by more than the amount of the tax cut, increases by the entire amount of the tax cut, in the presence of credit market imperfections. The Ricardian equivalence
Chapter11: Managing Aggregate Demand: Fiscal Policy
Section: Chapter Questions
Problem 5DQ
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Transcribed Image Text:What are the effects of a tax cut on consumption and savings in the presence of credit market imperfections? Does the Ricardian equivalence hold?
and savings
With a current tax cut, consumption
hold.
increases by less than the amount of the tax cut,
decreases by the entire amount of the tax cut,
does not change,
decreases by more than the amount of the tax cut,
decreases by less than the amount of the tax cut,
increases by more than the amount of the tax cut,
increases by the entire amount of the tax cut,
in the presence of credit market imperfections. The Ricardian equivalence
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