Some argue that budget deficits will lead to reduced private spending because:
A) the government will purchase so many goods and services that it will lead to a shortage of consumer goods and services.
B) budget deficits will reduce interest rates on savings and decrease consumers' wealth.
C) consumers, anticipating higher taxes, will reduce consumption to save money to pay the future taxes.
D) the government will have to increase transfer payments to finance the deficit.

Question

Quizplus · Accepted Answer

Consumers may anticipate that the government will raise taxes in the future to cover the budget deficit, leading them to save more and spend less currently, a concept known as Ricardian equivalence.

Some Argue That Budget Deficits Will Lead to Reduced Private