Question: Consider the following statement: A deficit during a war can be a good thing. First, the deficit is temporary, so after the war is over,

Consider the following statement:

A deficit during a war can be a good thing. First, the deficit is temporary, so after the war is over, the government can go right back to its old level of spending and taxes. Second, given that the evidence supports the Ricardian equivalence proposition, the deficit will stimulate the economy during wartime, helping to keep the unemployment rate low. Identify the mistakes in this statement. Is anything in this statement correct?

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There are several mistakes in this statement The statement incorrectly assumes that deficits du... View full answer

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