The theory that,under certain circumstances,a change in taxes will have absolutely no effect on total domestic saving,is known as the:
A) Ricardian equivalence.
B) Mill's minimum.
C) Marshall's conundrum.
D) Keynesian nullification.

Question

Quizplus · Accepted Answer

Ricardian equivalence is the theory that suggests that individuals anticipate future tax increases or decreases and adjust their savings accordingly. Thus, a change in taxes today will have no effect on total domestic saving since people will save or spend accordingly to offset any changes in their future tax liabilities. This theory is commonly associated with the economist David Ricardo.

The Theory That,under Certain Circumstances,a Change in Taxes Will Have