The theory of ricardian equivalence

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1. Using our best data-based guesses about real-world elasticity, the demand for loanable funds curve is probably rather ______________ and the effects of crowding out are likely to be ___________.

A. elastic; insignificant

B. elastic; significant

C. inelastic; insignificant

D. inelastic; significant

2. The theory of Ricardian equivalence

A. has no real support from economic research

B. won't work if the public bases its behavior on that of "opinion leaders"

C. won't work if expectations are formed rationally

D. implies that private savings rise when deficit spending occurs

3. Consider trading partners named Country M and Country X. We will do this question from the point of view of Country M.

If Country X experiences a recession, in the short run in Country M we are likely to see ____________ in overall prices and ______________ in output.

A. an increase; a decrease

B. a decrease; an increase

C. an increase; an increase

D. a decrease; a decrease

E. none of the above

Reference no: EM13819094

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