If an economy is in a recession and the government opts for an expansionary fiscal policy to shift AD closer to the potential output, a sound finance economist with a Classical view who holds the Ricardian equivalence theorem to be practically true would conclude that AD:

Question

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A sound finance economist with a Classical view who believes in the Ricardian equivalence theorem would argue that increased government spending is offset by a decrease in private consumption, as individuals anticipate future taxes to pay for the spending, leaving aggregate demand unchanged.

If an Economy Is in a Recession and the Government