how does ricardian equivalence impact consumer behavior 
under ricardian equivalence consumers are assumed to be forward looking and rational when the government cuts taxes and increases borrowing consumers anticipate future tax increases and save the extra income rather than spending it however behavioral economics suggests this may not always happen because individuals are not always rational the bottom linethe ricardian equivalence theorem states that government deficit spending is counterbalanced by increased private saving as individuals anticipate future tax hikes to repay the debt consequently the choice between tax financed or debt financed government expenditure becomes economically neutral as rational consumers adjust their behavior to offset fiscal policy changes 