| Economics Question..Help..Plz?
In closed Economy, Private Saving Plus Government Saving must equal Investment:
I=Sp+Sg
1. Assume that Ricardian equivalence holds. what happens to National savings when Government increases the deficit?
What Happen to Private Saving?
2. Ricardian equivalence focuses on the impact of future tax liabilities associated with increased deficits on private saving. What implications does the logic of Ricardian equivalence have for the consequences of additional publice investment? In particular, what will be the impact on private savings of an increased deficit used to finance public investment which has very high return, which will be realized only in the lives of the next generation?
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03-30-2008, 10:27 PM
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