Essay
The government of a small open economy announces a tax cut of $100 this year,combined with a tax increase of $110 next year,when the interest rate is 10%.What are the effects of this change on the world real interest rate,national saving,investment,and the current account balance in equilibrium when
a.Ricardian equivalence holds?
b.Ricardian equivalence does NOT hold?
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a.No effect on any of the variables.
b.R...View Answer
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Correct Answer:
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b.R...
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