1. If the Ricardian Equivalence Theorem holds, then the timing of taxes ‘do not matter’ in the sense that there is no effect on consumer demand, desired national saving, the current account and (in a closed economy) the real rate of interest. However, the timing of taxes does have implications for the composition of desired national saving (between the private and public sectors). Explain how.
2. True, False or Uncertain and Explain. The Ricardian Equivalence Theorem states that government spending ‘does not matter.’