Which of the following are implications of the Ricardian Equivalence Hypothesis? Mark all that apply.*

A. A tax increase today will have no effect on current Consumption

B. A tax cut does not affect the position of the IS curve

C. A tax cut does not affect households' permanent income

D. A tax cut today will have no effect on current Consumption.

Consider the consumption function that depends also on SRO and the modified IS curve that results from that. Suppose that x=1/2. Now suppose that there is an increase in US exports to Asia so that aEX increases by 1 percentage point. What will be the effect on short-run output? Assume the real interest rate remains unchanged.*

A. SRO will increase by 2 percentage point

B. SRO will increase by 1/2 percentage point

C. SRO will not be affected because of the Ricardian Equivalence Hypothesis

D. SRO will increase by 1 percentage point