• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 5 hours GREEN NEW DEAL = BLIZZARD OF LIES
  • 2 days "What’s In Store For Europe In 2023?" By the CIA (aka RFE/RL as a ruse to deceive readers)
  • 7 days America should go after China but it should be done in a wise way.
  • 8 hours Even Shell Agrees with Climate Change!
  • 2 days How Far Have We Really Gotten With Alternative Energy
  • 2 days World could get rid of Putin and Russia but nobody is bold enough
  • 3 days The European Union is exceptional in its political divide. Examples are apparent in Hungary, Slovakia, Sweden, Netherlands, Belarus, Ireland, etc.
  • 5 days Oil Stocks, Market Direction, Bitcoin, Minerals, Gold, Silver - Technical Trading <--- Chris Vermeulen & Gareth Soloway weigh in

Breaking News:

OPEC Lifts Production in February

Anti-Oil Activists Shift Focus to Insurers

Anti-Oil Activists Shift Focus to Insurers

Activists have also started attacking…

Explaining the Relationship between Stimulus and Spending in Economic Growth

Let’s say that private gdp is 100 and government spending is 100.  Gdp then suddenly goes up to 200, so government spending as a percentage of gdp falls from 50% to 33.3%.  This is not a contractionary event.  It is fully possible to argue “government spending should go up too, to slot more public goods into the larger output,” but the initial change is expansionary, even though government spending as a percentage of gdp took a steep dive.

Let’s say that private gdp is 100 and government spending is 100.  Government spending stays the same in nominal terms but there is overall price inflation from a nominal change.  It is fully possible to argue “government spending should go up too, to restore the percentage of public goods in national output,” but the initial change is again expansionary in macroeconomic terms.  Nominal values are up.

In other words, when judging whether fiscal policy is contractionary or expansionary in macroeconomic terms, we do not automatically adjust for percentage of gdp and inflation.  Start instead by looking at nominal government spending, and then perhaps take a glance at nominal gdp or related measures.  The theory, after all, is about nominal values, most of all in the short run.

If you wish, I could construct a similar exercise for population or an increase in the labor force and come out with a similar result.

Click here to read the full article



Join the discussion | Back to homepage



Leave a comment

Leave a comment

EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News