Principles of Macroeconomics / Unit 15 MAC 1412 short lesson, about 20 seconds
Ricardian Equivalence
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The idea
Ricardian equivalence argues that households see government borrowing as a future tax bill and save more against it. If the offset were complete, neither investment nor the trade balance would change.
In practice
The claim is named for the nineteenth-century economist who first raised it.
Where people slip
It is a claim about how far households look ahead, so it is testable.
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