The assertion that increases in government spending and decreases in taxes are largely offset by increases in savings is called
A) implementation lag.
B) impact lag.
C) savings lag.
D) the new classical critique.
E) crowding-out.

Question

Quizplus · Accepted Answer

The assertion that increases in government spending and decreases in taxes are largely offset by increases in savings is one of the main arguments of the new classical critique of Keynesian economics. This view suggests that individuals and firms anticipate the future tax increases that will be necessary to pay for deficit spending, and therefore save more to offset the expected higher taxes.

The Assertion That Increases in Government Spending and Decreases in Taxes