Describe in one sentence what Ricardian equivalence implies for the government budget and the current account. In another sentence, describe to what extent the equivalence holds in practice.

In the '90s, the Clinton government balanced the budget and paid down the government debt. At the same time, the US current account deficit only got worse. What internal economic process allowed for such decoupling between the public debt and the external debt?

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Ricardian equivalence implies that changes in government budget deficits ... View the full answer