3 ms·
This isn't necessarily true if the deficit spending increases the amount of real goods sufficiently. For example, if the government increases the money supply
by gamegoblin 4y ago
This isn't necessarily true if the deficit spending increases the amount of real goods sufficiently.
For example, if the government increases the money supply by 10% by deficit spending, but the activity induced by that spending increases the amount of goods in the economy by 10%, the action will have no effect on the general price level.
The activities that typically fall under this category are building infrastructure or introducing legislation that mitigates collective action problems.
Obviously, a lot of (most?) government spending doesn't meet this criteria, so your comment is still a fair criticism of most governments in practice.
- deleted 4y ago[deleted]