[{"data":1,"prerenderedAt":58},["ShallowReactive",2],{"term:ricardian-equivalence":3},{"term":4,"related":45},{"id":5,"title":6,"body":7,"category":27,"description":28,"extension":29,"faq":30,"meta":31,"navigation":32,"path":33,"related":34,"seo":38,"stem":39,"takeaways":40,"__hash__":44},"terms\u002Fterms\u002Fricardian-equivalence.md","Ricardian Equivalence",{"type":8,"value":9,"toc":22},"minimark",[10,15,19],[11,12,14],"h2",{"id":13},"understanding-ricardian-equivalence","Understanding Ricardian Equivalence",[16,17,18],"p",{},"Named after David Ricardo and formalized by Robert Barro in 1974, the theory says that if people expect today's borrowing to mean higher taxes later, they will save a tax cut rather than spend it.",[16,20,21],{},"Evidence suggests it holds only partly: many households, especially those short of cash, spend a large share of tax cuts.",{"title":23,"searchDepth":24,"depth":24,"links":25},"",2,[26],{"id":13,"depth":24,"text":14},"economy","The idea that debt-financed tax cuts may not boost spending because people save to pay future taxes.","md",[],{},true,"\u002Fterms\u002Fricardian-equivalence",[35,36,37],"fiscal-policy","marginal-propensity-to-consume","rational-expectations",{"title":6,"description":28},"terms\u002Fricardian-equivalence",[41,42,43],"Debt-financed tax cuts may be saved, not spent.","It assumes forward-looking households with good access to credit.","Real-world evidence supports it only partly.","UGpYWwZ63gM61-_Nw8E_FUxF7tpCLU3vPtnRZ_vvzKc",[46,50,54],{"title":47,"description":48,"path":49},"Fiscal Policy","The use of government spending and taxes to influence the economy.","\u002Fterms\u002Ffiscal-policy",{"title":51,"description":52,"path":53},"Marginal Propensity to Consume (MPC)","The share of an extra dollar of income that a household spends.","\u002Fterms\u002Fmarginal-propensity-to-consume",{"title":55,"description":56,"path":57},"Rational Expectations","The assumption that people use all available information to forecast the future without systematic errors.","\u002Fterms\u002Frational-expectations",1793374005855]