According to Ricardian Equivalence,consumers may not respond to a tax cut ________.

Question

Quizplus · Accepted Answer

Ricardian Equivalence theory suggests that individuals will not change their spending or savings behavior in response to a tax cut, as they understand that the government will have to raise taxes in the future to pay back any debt incurred. This suggests that regardless of who the tax cut is directed towards, individuals are unlikely to change their behavior. Therefore, option C is correct. Options A and B are not correct as the theory suggests that the response is not based on who the tax cut is directed towards. Option D is incorrect as Ricardian Equivalence theory does not suggest that individuals' sense of patriotism plays a role in their decision-making.

According to Ricardian Equivalence,consumers May Not Respond to a Tax