Suppose a deficit-financed tax cut causes an increase in the interest rate. This is consistent with the Ricardian equivalence proposition. True b. False 13. According to the conventional view of government debt, a deficit financed tax cut will cause a. a fall in the interest rate. All the above.
Government deficits are bad since they always result in inflation.
True b. False 15. This will, of course, cause inflation. The government could permanently stop inflation by simply borrowing every period to finance the deficit. True b. False Answers 1.