According to the Ricardian Equivalence Theorem, Government Deficits Do Not

Multiple Choice

According to the Ricardian equivalence theorem, government deficits do not affect the level of output because people:

A) do not understand the relationship between deficits and aggregate demand.
B) know that current deficits must be paid in the future and therefore reduce savings today.
C) recognize that current deficits must be paid by future generations and therefore spend more today.
D) recognize that current deficits must be paid in the future and therefore increase savings today to pay higher future taxes.