According to economists who believe in Ricardian Equivalence,when the government runs a deficit and issues bonds,

Question

Quizplus · Accepted Answer

According to Ricardian Equivalence, individuals and households anticipate the future tax increases that will be needed to finance the government deficit spending. As a result, they increase their savings to prepare for these future taxes, which leads to a decrease in the demand for bonds. Therefore, choice A is the correct answer. Choices B and C are incorrect because they describe actions that are not necessarily required by Ricardian Equivalence. Choice D is incorrect because it is the opposite of what the Fed would need to do to keep interest rates from rising.

According to Economists Who Believe in Ricardian Equivalence,when the Government