Ricardian Equivalence

Explain Ricardian equivalence, and discuss what implication it might have on the efficacy of expansionary fiscal policy. Ricardian equivalence states that for a given level of government spending a change in taxes – financed by a deficit – will have no effect on the real economy. It is posited that individuals are forward thinking and Read more about Ricardian Equivalence[…]

The Costs and Distributional Effects of Unemployment

The classical view on unemployment says that there are only unemployed people who are not able and willing to work at the going wage rate. So if people would accept a lower wage they would find jobs. In this view all unemployment is a short-term problem and the best solution is laissez faire – leave Read more about The Costs and Distributional Effects of Unemployment[…]