Illustrate why lower taxes in current period but higher

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Reference no: EM13151221

The Ricardian Equivalence theorem (a) State the Ricardian equivalence result. (b) Now suppose that there are credit market imperfections so that the lending rate (r1) is smaller than the borrowing rate (r2): r2 > r1. Explain and graphically illustrate why lower taxes in the current period but higher taxes in the future may make some consumers better off.

Reference no: EM13151221

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