Ricardian equivalence

Ricardian equivalence is the theory that rational private households might shift their saving to offset government saving or borrowing.

Definition

According to Principles of Economics by Timothy Taylor (3rd edition),

Ricardian equivalence. The theory that rational private households might shift their saving to offset government saving or borrowing.

According to Macroeconomics by Mankiw (7th edition),

Ricardian equivalence. The theory according to which forward-looking consumers fully anticipate the future taxes implied by government debt, so that government borrowing today coupled with a tax increase in the future to repay the debt has the same effect on the economy as a tax increase today.