Ricardian equivalence

English

Etymology

Proposed by economist David Ricardo in the early 19th century.

Noun

Ricardian equivalence (uncountable)

1. (economics) The idea that consumers are forward-looking and so internalize the government's budget constraint when making their consumption decisions, so that, for a given pattern of government spending, the method of financing such spending does not affect agents' consumption decisions, and thus does not change aggregate demand.