The Ricardian equivalence proposition is NOT supported by evidence,because
A)consumers may respond to the current tax cut by increasing their desired consumption.
B)consumers may increase their saving to respond to future tax increase.
C)consumers do not change their consumption because they expect an increase in future tax rates.
D)a cut in current tax does not affect the ultimate tax burden borne by consumers.

Question

Quizplus · Accepted Answer

Ricardian equivalence suggests that consumers will not change their consumption in response to a tax cut because they anticipate future tax increases to offset government debt. However, if consumers increase their consumption following a tax cut, it indicates that they do not fully anticipate or respond to future tax liabilities, thus not supporting Ricardian equivalence.

The Ricardian Equivalence Proposition Is NOT Supported by Evidence,because