A debt-financed tax cut will ______ total saving in the traditional view and ______ total saving in the view of Ricardian equivalence.

Question

Quizplus · Accepted Answer

In the traditional view, a debt-financed tax cut decreases total saving because it reduces public saving. In the Ricardian equivalence view, total saving does not change because individuals save the tax cut to pay for future tax increases.

A Debt-Financed Tax Cut Will ______ Total Saving in the Traditional