Ricardian equivalence is the argument that government stimulus spending will fail because taxpayers save, rather than spend, their stimulus dollars to pay for anticipated future taxes.

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Ricardian equivalence theory proposes that individuals will anticipate future taxes to pay off government debt and therefore save their stimulus dollars rather than spend them, which in turn leads to the ineffectiveness of government stimulus spending.

Ricardian Equivalence Is the Argument That Government Stimulus Spending Will