Ricardian equivalence

noun

The idea that consumers are forward-looking and so internalize the government's budget constraint when making their consumption decisions, so that, for a given pattern of government spending, the method of financing such spending does not affect agents' consumption decisions, and thus does not change aggregate demand.

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Meanings

nounRicardian equivalence (uncountable)
  1. uncountableeconomicsThe idea that consumers are forward-looking and so internalize the government's budget constraint when making their consumption decisions, so that, for a given pattern of government spending, the method of financing such spending does not affect agents' consumption decisions, and thus does not change aggregate demand.

Origin

Proposed by economist David Ricardo in the early 19th century.

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Cite this entry
APA

Ricardian equivalence. (n.d.). In WatkinsX Dictionary. Retrieved November 5, 2026, from https://dictionary.watkinsx.com/word/Ricardian%20equivalence

MLA

“Ricardian equivalence.” WatkinsX Dictionary, https://dictionary.watkinsx.com/word/Ricardian%20equivalence. Accessed November 5, 2026.

Chicago

WatkinsX Dictionary, s.v. “Ricardian equivalence,” accessed November 5, 2026, https://dictionary.watkinsx.com/word/Ricardian%20equivalence.

Source: Ricardian equivalence on Wiktionary, CC BY-SA 4.0.