When there are credit market frictions,Ricardian equivalence may not hold because
A) consumers cannot understand the implications of the government budget constraint.
B) a tax cut in the present with a future increase in taxes works effectively like a loan.
C) an increase in government saving is matched one-for-one by a decrease in private saving.
D) social security is fully-funded.
Correct Answer:
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Q1: Limited commitment means
A) one cannot credibly promise
Q2: A default premium is the interest rate
Q4: In the two-period model with asymmetric information,the
Q5: In the two-period model with asymmetric information,a
Q6: The phenomenon that some consumers pay a
Q7: If the proportion of bad borrowers increases,
A)
Q8: In the two-period model,the budget constraint is
Q9: In the two-period model with limited commitment,if
Q10: Collateral is used in all of the
Q11: In the two-period model with asymmetric information,a
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