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Ah yes, studies like the one on tax cuts for the rich are fine, but not ones on government spending levels. Any way, you're over-simplifying how an economy wor
by CryptoPunk 6y ago
Ah yes, studies like the one on tax cuts for the rich are fine, but not ones on government spending levels.
Any way, you're over-simplifying how an economy works.
If there are not enough profitable investments to maintain current investment levels, then investment levels should decline. The government should not invest unprofitably just to maintain current levels.
And no, GDP will not drop. Current productive capital will generate the same value of goods/service, and prices will drop to clearing level until everything produced is consumed. It's better for the population to enjoy higher consumption levels, or to create stockpiles for the future, than have their labor and capital output diverted to projects that will provide them with less resources than they put in.
- RobertoG 6y ago"And no, GDP will not drop. Current productive [..]" I don't understand what you are saying there. GDP is a function of spending in the economy. If there is a fall in investment there is a fall in spending. If it's not compensate somehow, GDP will fall. "[..] than have their labor and capital output diverted to projects that will provide them with less resources than they put in." I don't understand that neither. Is better to have people unemployed than put those people to work?
- CryptoPunk 6y agoSpending doesn't decrease when investment drops. The spending is reallocation to consumer spending.