If the Ricardian equivalence is true,a tax cut will
A)increase the current account surplus.
B)decrease the current account surplus.
C)have no effect on the current account.
D)increase national saving.

Question

Quizplus · Accepted Answer

If Ricardian equivalence holds, consumers anticipate future taxes to offset current tax cuts, so they save the tax cut rather than spend it, leaving the current account unchanged.

If the Ricardian Equivalence Is True,a Tax Cut Will