Proponents of Ricardian equivalence argue that the relevant decision-making unit is the:

Question

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Ricardian equivalence suggests that when a government finances spending through debt rather than taxes, it does not affect the total level of demand in the economy. This theory assumes that individuals are part of an "infinitely lived family" that plans its spending over an infinite horizon. They understand that government debt will eventually need to be paid off, likely through future taxation, and thus they save any current tax reductions to pay for future tax increases, leaving their spending unchanged.

Proponents of Ricardian Equivalence Argue That the Relevant Decision-Making Unit