According to David Ricardo, an increase in government spending without any tax increase will not increase aggregate demand because
A)consumers will consume less and save more to prepare for increased taxes in the future.
B)the private sector is more likely than the public sector to spend any extra income on national defense.
C)consumers will increase their consumption proportionately more than Keynesian economists believe they will.
D)consumers will save less than they otherwise would have.

Question

Quizplus · Accepted Answer

According to David Ricardo's theory, known as Ricardian equivalence, consumers anticipate future taxes to pay for increased government spending, so they save more to offset the expected future tax burden, leaving aggregate demand unchanged.

According to David Ricardo, an Increase in Government Spending Without