Ricardian equivalence
Hypothesis on the equivalence of tax vs. debt financing / From Wikipedia, the free encyclopedia
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The Ricardian equivalence proposition (also known as the Ricardo–de Viti–Barro equivalence theorem[1]) is an economic hypothesis holding that consumers are forward-looking and so internalize the government's budget constraint when making their consumption decisions. This leads to the result that, for a given pattern of government spending, the method of financing such spending does not affect agents' consumption decisions, and thus, it does not change aggregate demand.