Ricardian equivalence
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(economics) The idea that consumers are forward-looking and so internalize the government's budget constraint when making their consumption decisions, so that, for a given pattern of government spending, the method of financing such spending does not affect agents' consumption decisions, and thus does not change aggregate demand.
Ricardian equivalence
Many macroeconomists debate whether Ricardian equivalence holds in practice, because it requires households to be perfectly forward-looking and to fully internalize the government's budget constraint when making consumption decisions.
Many macroeconomists debate whether Ricardian equivalence holds in practice, because it requires households to be perfectly forward-looking and to fully internalize the government's budget constraint when making consumption decisions.
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