The theory that government borrowing may function like an increase in taxes, that is, reducing current consumption and business expenditures, was formulated by
A)John Maynard Keynes
B)Jean Baptiste Say.
C)David Ricardo.
D)Adam Smith.

Question

Quizplus · Accepted Answer

David Ricardo formulated the theory known as Ricardian Equivalence, which suggests that government borrowing can have effects similar to taxation, as people anticipate future taxes to pay off the debt and thus reduce their current consumption.

The Theory That Government Borrowing May Function Like an Increase