In the context of public finance, the concept of 'Ricardian Equivalence' suggests that:
A. Government borrowing is always expansionary
B. Tax-financed and debt-financed government spending have the same effect on the economy
C. Deficit financing always increases private consumption
D. Public debt has no intergenerational implications
Answer: Option B
Solution (By JKSSB Mock Tests)
Ricardian Equivalence, proposed by David Ricardo and revived by Robert Barro, argues that rational agents anticipate future taxes to repay debt, so government borrowing does not stimulate demand.
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