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The Ricardian Equivalence hypothesis typically assumes that full and perfect capital markets exist. Discuss how the presence of borrowing constraints might affect the results of
The Ricardian Equivalence hypothesis typically assumes that full and perfect capital markets exist. Discuss how the presence of borrowing constraints might affect the results of the Ricardian Equivalence hypothesis. Consider a tax cut financed by government borrowing for a household that faces a binding borrowing constraint. Use a graph to demonstrate your answer.
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