Problem
Ricardian equivalence: Suppose that the government fears the economy might be heading into a recession and decides to cut income taxes today in an effort to prevent the recession.
(a) How does the Ricardian equivalence argument apply in this case? How will consumption respond according to this argument?
(b) How will your answer change if some individuals are borrowing constrained?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.