Assertion (A): Ricardian equivalence implies that substituting debt financing for current taxation to fund a given level of government expenditure leaves aggregate consumption unchanged. Reason (R): Forward-looking households with infinite planning horizons fully internalise the government's intertemporal budget constraint, saving the entire tax cut to pay future tax liabilities. Select the correct code:

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Economics · Fiscal Policy

Verified Solution4 OptionsUpdated: October 2026👁️1 View

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Both A and R are true, and R is the correct explanation of A

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