1. 6 points In early 1992, President George H.W. Bush used an executive order to reduce the amount of income taxes withheld from people's paychecks. The change in withholding did not change the amount of taxes that people had to pay in April 1993 so people either had to pay more in taxes than otherwise or had to receive a lower tax refund than otherwise. a. The stated goal of this policy was, according to President Bush, to provide money people can use to help pay for clothing, college, or to get a new car. Is the president's rationale for the change in withholding consistent with Ricardian equivalence? Why or why not? b. According to a study conducted by economists Matthew Shapiro and Joel Slemrod that asked people at the time of the change in withholding what they intended to do with the extra money in their paychecks, 57% said that they would either save it, use it to repay debts, or raise their withholding to undue the effects of Bushs executive order. Are these individuals behaving in a manner consistent with Ricardian equivalence? Explain why or why not. c. According to the same Shapiro and Slemrod study, the remaining 43% of those surveyed said that they planned to spend the extra income even though they knew that in 1993 they would have to pay more taxes. Are these individuals behaving in a manner consistent with Ricardian equivalence? Explain why or why not and if not, provide a possible reason why they are not behaving in a Ricardian manner. 1. 6 points In early 1992, President George H.W. Bush used an executive order to reduce the amount of income taxes withheld from people's paychecks. The change in withholding did not change the amount of taxes that people had to pay in April 1993 so people either had to pay more in taxes than otherwise or had to receive a lower tax refund than otherwise. a. The stated goal of this policy was, according to President Bush, to provide money people can use to help pay for clothing, college, or to get a new car. Is the president's rationale for the change in withholding consistent with Ricardian equivalence? Why or why not? b. According to a study conducted by economists Matthew Shapiro and Joel Slemrod that asked people at the time of the change in withholding what they intended to do with the extra money in their paychecks, 57% said that they would either save it, use it to repay debts, or raise their withholding to undue the effects of Bushs executive order. Are these individuals behaving in a manner consistent with Ricardian equivalence? Explain why or why not. c. According to the same Shapiro and Slemrod study, the remaining 43% of those surveyed said that they planned to spend the extra income even though they knew that in 1993 they would have to pay more taxes. Are these individuals behaving in a manner consistent with Ricardian equivalence? Explain why or why not and if not, provide a possible reason why they are not behaving in a Ricardian manner