The Ricardian Equivalence Theorem States That

The Ricardian equivalence theorem states that

A) an increase in government spending by the federal government leads to offsetting reductions in state government spending.
B) an increase in government spending financed by higher taxes has no effect on aggregate demand.
C) spending on national defense is a direct expenditure offset.
D) government spending financed by taxes is equivalent to government spending financed by borrowing.