Ricardian equivalence
ECONOMIC THEORY
Ricardian proposition; Ricardan equivalence hypothesis; Barro-Ricardo theorem; Barro-Ricardo equivalence; Ricardian Equivalence; Ricardan Equivalence Hypothesis; Ricardian theory of rent; Ricardian equivalence theorem; Barro–Ricardo equivalence; Barro–Ricardo equivalence theorem; Barro-Ricardo equivalence theorem
The Ricardian equivalence proposition (also known as the Ricardo–de Viti–Barro equivalence theorem) is an economic hypothesis holding that consumers are forward-looking and so internalize the government's budget constraint when making their consumption decisions. This leads to the result that, for a given pattern of government spending, the method of financing such spending does not affect agents' consumption decisions, and thus, it does not change aggregate demand.