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2017-09-13

Some cling to the notion that stimulus is unhelpful, risky and hard. Such views need updating. The Ecnonomist

Economists of all stripes argued that the “multiplier” on stimulus—the amount by which a dollar of borrowing raises GDP—is usually low. Households save their higher incomes in expectation of offsetting future tax rises

But studies since the Great Recession tend to find that multipliers are substantially higher than once thought, particularly when monetary policy is constrained. 

Multipliers in such cases are often closer to two, ie, GDP increases by nearly twice the size of the stimulus.


Comment by Rolf Englund: 
If the marginal tax rate is 50 per cent we have a Free Lunch.

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