Economics: What is Ricardian Equivalence?

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Economics: What is Ricardian Equivalence?

Ricardian Equivalence is a situation which was named after David Ricardo. 

“Consumers respond to changes in fiscal policy in ways that make fiscal policy less effective. If government cuts taxes to stimulate the economy, people may choose to save the tax cut instead of spending it. If people save their tax cut instead of spending it, the Aggregate Demand curve never shifts out. The multiplier will be zero,” Marginal Revolution on the Ricardian Equivalence

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Watch the video below for more details: 

 

References 

Barro, R. J. (1990). Macroeconomic policy. Cambridge, Mass: Harvard University Press.

Marginal University 

Regional Conference on Science, Technology and Social Sciences, & In Mohamad, N. M. Y. (2019). Proceedings of the Regional Conference on Science, Technology and Social Sciences (RCSTSS 2016).

Saitō, I. (2016). Fading Ricardian equivalence in ageing Japan.

 

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Geoffrey Kerosi, economic and public policy analyst based in Nairobi City. Email: geoffrey@kerosi.com. WhatsApp: +254713 639 776 YouTube: Kerosi TV

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