The idea that if governments cut taxes but not spending,people will not change their behavior,and expansionary policy will have little expansionary effect is known as:

Question

Quizplus · Accepted Answer

This idea is known as Ricardian equivalence, named after the economist David Ricardo, who proposed that if the government cuts taxes, individuals will anticipate future tax increases to pay for the public debt, and therefore save their tax cut instead of spending it. This will offset the expansionary effect of the tax cut on aggregate demand. Keynesian policy (B) refers to the theory that government intervention in the economy, especially through fiscal policy, can stabilize economic fluctuations. The invisible hand (C) is a metaphor used by Adam Smith to describe how the market mechanism coordinates individual self-interest to produce the best outcomes for society as a whole. Ricardian countenance (D) is not a recognized economic concept.

The Idea That If Governments Cut Taxes but Not Spending,people