The Ricardian equivalence theorem implies that
A)the timing of taxes collected by the government is neutral.
B)an increase in government spending has no effect on the economy, as long as there is an equal change in taxes.
C)government debt policy must be handled correctly for the economy to prosper.
D)the present value of government spending must be equal to the present value of taxes.
E)the amounts of government spending are neutral.

Question

Quizplus · Accepted Answer

Ricardian equivalence suggests that consumers anticipate future taxes to pay off government debt, so the timing of taxes doesn't affect their consumption, making it neutral.

The Ricardian Equivalence Theorem Implies That