Suppose in the country of Miltonia, Ricardian equivalence is 100% true. A- If Miltonian tax rates fall, what happens to spending? Do people spend their tax cuts, save the money, or spend some and save the rest? B- If there is a rise in Miltonian taxes, what happens to spending? Do people start spending less, or do they dissave/borrow more to keep spending at the same rate?
Suppose in the country of Miltonia, Ricardian equivalence is 100% true. A- If Miltonian tax rates fall, what happens to spending? Do people spend their tax cuts, save the money, or spend some and save the rest? B- If there is a rise in Miltonian taxes, what happens to spending? Do people start spending less, or do they dissave/borrow more to keep spending at the same rate?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![Suppose in the country of Miltonia,
Ricardian equivalence is 100% true.
A- If Miltonian tax rates fall, what happens
to spending? Do people spend their tax
cuts, save the money, or spend some and
save the rest?
B- If there is a rise in Miltonian taxes, what
happens to spending? Do people start
spending less, or do they dissave/borrow
more to keep spending at the same rate?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F89334573-8ad5-4e81-b014-fdfd29bae38c%2Fa7d77877-c4a7-426d-89ec-63616ba3fbb9%2Fnnsfis6_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Suppose in the country of Miltonia,
Ricardian equivalence is 100% true.
A- If Miltonian tax rates fall, what happens
to spending? Do people spend their tax
cuts, save the money, or spend some and
save the rest?
B- If there is a rise in Miltonian taxes, what
happens to spending? Do people start
spending less, or do they dissave/borrow
more to keep spending at the same rate?
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