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Ricardian equivalence theorem (D9, H2, H6)<br />This states that deficit finance has exactly the same economic impact as current taxation. This is because individuals take into account future taxes, e.g. the bonds created to finance a deficit can be given to one's children who can use them to pay future taxes. Thus, individuals increase their savings by an amount equal to tax cuts or the increases in government spending with the consequence that deficit finance does not stimulate the national economy. This form of CROWDING oUT is named after RICARDO but formally explained by Barro.<br /><em>See also:</em> overlapping generations model <br /><em>Reference</em><br />Barro, R. (1974) 'Are Government bonds net wealth?', Journal of Political Economy 82: 1095-175.
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currencies of the world (F3) see Appendix A
natural trade (F1)<br />FREE TRADE that follows its natural course and is not distorted by government subsidies. Strongly advocated by Adam SMITH.
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