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Ricardian Equivalence Or The Indifference Between Tax And Debt Financing, Chad Moutray

Masters Theses

Ricardian equivalence is a topic which has attracted much attention in the economic journals in the past couple of decades. Economic theory states that a tax cut gives the public a greater disposable income. Thus, the public will consume more, and the economy will grow. However, if the tax cut is financed by debt, the public will perceive that a future tax increase is inevitable to pay off the debt. Under this scenario, the public will not consume more. Instead, they will save all of their increased disposable income in anticipation of the future tax increase. Ricardian equivalence then is …

Non-Monetary Effects On Inflation Within The Price-Gap Model, Leonard Loebach

Masters Theses

The purpose of this thesis is to examine some of the various non-monetary effects on inflation within the framework of the price-gap model. Some of the non-monetary shocks that can affect inflation include wage adjustments, changes in basic commodity prices (for example, crude oil), changes in the exchange rates, and shifts in inflationary expectations.

In April of 1989, a study was put out by the Federal Reserve (staff study 157) that examined the relationship between the current price level and an estimate of the long-run equilibrium price level. In the study, an indicator P* (pronounced P-star) was used to estimate …