Currently the government has a balanced budget. It decides to follow an expansionary fiscal policy of reducing taxes by​ $100 billion. Which of the following statements bests describes the Ricardian Equivalence Theorem under these​ conditions?

A. Households save more than anticipated.
B. Congress decreases government spending by an equivalent amount.
C. People figure that future generations will bear the burden of the tax increase and they themselves are not affected by the tax change.
D. Consumption rises and causes the aggregate supply to increase by the full effect of the multiplier.

answer; at prices that violate government price regulations;

the answer is "b.the increased supply will create a surplus. "

the essential thought behind price controls is straightforward - utilize the power of law to modify the equilibrium of a market. for instance, the legislature may choose that the steel business needs to survive, and in this way pass a law to set a value floor on steel. this implies all steel sold must offer at or over the floor value, which must be set over the equilibrium cost for it to have any impact. the switch could likewise happen - the administration can choose that steel is excessively costly and set a value roof underneath its equilibrium value, with the goal that all steel must be sold at or beneath that ceiling.