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Ricardian equivalence is the idea that people might just use the extra money from their tax cuts to buy the very government bonds that pay
Ricardian equivalence is the idea that people might just use the extra money from their tax cuts to buy the very government bonds that pay for the tax cut. Let's think about the opposite situation: If Ricardian equivalence is true, and the government raises taxes (holding spending constant), how does the average person's behavior change?In other words, how does he or she react to a tax increase?
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