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United States (205,876)
Economics (294)
ECON 305 (9)
Dr.Neri (9)
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Econ 16.docx

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Department
Economics
Course
ECON 305
Professor
Dr.Neri
Semester
Fall

Description
Econ 16  Ricardian View of Government Debt  Ricardian equivalence: consumers are forward looking and therefore base their spending decisions not only on their current income but also on their expected future income.  Traditional view says when taxes are cut people spend more  Government borrowing today (reduce taxes) means higher taxes in the future so people do not spend more • Value of the bond is offset by the value of the future tax liability  Financing the government by debt is equivalent to financing it by taxes • The increase in private savings offsets the decrease in public saving • National saving remains the same ♦ Would make a difference if the reduction in taxes is offset by a decrease in government spen
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