The tendency for private saving to increase in response to growing government deficits is known as the
A) Ricardo-Barro effect.
B) crowding out effect.
C) Keynes effect.
D) money illusion effect.

Question

Quizplus · Accepted Answer

The tendency for private saving to increase in response to growing government deficits is known as the Ricardo-Barro effect, named after economists David Ricardo and Robert Barro. This theory suggests that individuals will save more when they perceive that government deficits will eventually lead to higher taxes or inflation, which will in turn reduce their disposable income.

The Tendency for Private Saving to Increase in Response to Growing