Ricardian equivalence

Okay, imagine that you have some money in your 'piggy bank,' and you want to buy some toys. However, you also know that in the future, you're going to grow up and need to pay for some important things like buying your own house or saving up for your education.

Now, you have two choices. You can either spend all of your money right now on all the toys you want, or you can choose to save some of it for the future. If you decide to save some of your money, you'll need to be more careful about how you spend the rest of it.

The idea behind Ricardian equivalence is sort of like this. It's a theory that suggests that when the government decides to borrow money, people should think about it as if they were saving money themselves. In this case, the government's debt becomes like the 'piggy bank' for the population, and the population should think about it in a very similar way as they would their own savings.

If people start believing that the government is going to have to pay back money in the future - just like you might believe that you have to save up for things you need in the future - then they might be more careful with their own money. They might choose to save more of their own money today, because they know that they will eventually have to help pay back the government.

So, the idea behind Ricardian equivalence is that if people believe that the government's borrowing today will need to be paid back later, they will act accordingly and save more of their own money. As a result, borrowing by the government doesn't really increase the overall amount of spending in the economy - people are just shifting around when they spend money.