Proponents of Ricardian Equivalence reject the view that deficits
A)cause the monetary base to decrease.
B)cause the monetary base to increase.
C)have no effect on the monetary base.
D)cannot be inflationary,even when financed by tax hikes.

Question

Quizplus · Accepted Answer

Proponents of Ricardian Equivalence argue that deficits do not affect the monetary base because individuals anticipate future taxes to pay off the debt, leading them to save more, thus offsetting any increase in the monetary base.

Proponents of Ricardian Equivalence Reject the View That Deficits