The proposition that financing debt by issuing bonds merely postpones taxation and is therefore in many instances equivalent to current taxation is known as the
A)balanced budget theorem
B)rational expectations proposition
C)Barro-Ricardo equivalence proposition
D)Reagan theory of taxation
E)none of the above

Question

Quizplus · Accepted Answer

The Barro-Ricardo equivalence proposition states that financing debt by issuing bonds only postpones taxation and is usually equivalent to current taxation. This idea implies that taxpayers will ultimately have to pay for government spending either in the present or in the future. Therefore, the correct answer is C) Barro-Ricardo equivalence proposition.

The Proposition That Financing Debt by Issuing Bonds Merely Postpones