A. an increase in the government budget deficit has no effect on aggregate demand.
B. tax decreases and government spending increases have equivalent effects on aggregate demand.
C. increase in tax rates will reduce work effort, and thus there will be no effect on output or aggregate demand.
D. direct and indirect crowding out has the same effect on aggregate demand.
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Home » Business » The Ricardian equivalence theorem states that A. an increase in the government budget deficit has no effect on aggregate demand. B. tax decreases and government spending increases have equivalent effects on aggregate demand. C.