You may simulate how individual economic agents react to keep/change their consumption-saving proportion by means of both the income effect (consumption + saving/borrowing) and the utility function showing their propensity to consume.
The income effect is calculated with the income of each time period (Yt), the interest rate for borrowing and saving (r), the additional interest payment rate of incurring debt (+d), and the wage growth rate (g).
The utility effect is calculated with the quadratic equation opening downward whose maximum is set differently for each different propensity to consume.
Click https://uranaisearchastrology.files.wordpress.com/2022/07/recardianequivalencetest-1.xlsx to download.
The interesting factor is that the number of the economic agents drastically change their preference of incurring debt to increase consumption over saving only when the inflation rate is significantly higher than the interest rate in terms of this simulator.
By contrast, under the severe recession/depression where the inflation rate and the wage growth rate are negative, the economic agents rather change their attitude to save more than spending and those with the substantially high propensity to consume simply disappear. The current saved income as well as the future value of the debt borrowed at the past become higher so that they rather change their attitude to save more.
The propensity to consume is fixed regardless of any situation unless either the high inflation or the severe depression strikes. Therefore, as long as the economic agents behave rationally to their income effect, the Ricardian Equivalence holds.
