Economics · Macroeconomics
Which observation most directly contradicts strong Ricardian equivalence?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Households fully offset a tax cut with saving
- 2Government borrowing raises interest rates
- 3Liquidity-constrained households consume more after a tax cut✓
- 4Consumption responds only to permanent income
Correct answer
Liquidity-constrained households consume more after a tax cut
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