The Theory of Ricardian Equivalence Argues That Expansionary Fiscal Policy

Multiple Choice

The theory of Ricardian equivalence argues that expansionary fiscal policy:

A) will have no effect on the economy because consumers, anticipating higher taxes to pay for government spending, will decrease spending today to save for the higher taxes.
B) is not effective because it causes higher interest rates and crowds out investment spending.
C) is effective, but contractionary fiscal policy is not.
D) is more effective than expansionary monetary policy.