Answer:
Ricardian equivalence:
a. Occurs when people see that lower taxes today means higher taxes in the future, so instead of spending their tax cut, they save it to pay future taxes.
Explanation:
The Ricardian equivalence is a theory given by the English economist David Ricardo in the 19th century, where <em>he suggests that the fiscal deficit </em>(when the nation spends more than obtain) <em>doesn't affect the aggregate demand </em>(the possibility of the country to acquire products) by two reasons:
1. Finances the spend with more high taxes, it could occur in the present or in the future, but <em>if the people see that the taxes are low and the country is spending, they save money for the future higher taxes</em>.
2. increasing external debt.
