Question

Classical economists think that lump-sum tax changes:

a. should be used to smooth business cycles.
b. have a powerful effect on the economy.
c. affect aggregate demand after a lag.
d. have no effect on the economy because of Ricardian equivalence.

Answer 1

Classical economists believe that lump-sum tax changes affect aggregate demand after a lag.

Step-by-step explanation:

Classical economists believe that lump-sum tax changes affect aggregate demand after a lag. According to classical economic theory, changes in taxes can influence the spending patterns of individuals and businesses, which in turn affects aggregate demand. However, the impact of tax changes on the economy may not be immediate and may take some time to fully materialize.