Paul Krugman: Stimulus issues
The big problem with attempts to provide temporary economic stimulus is how to ensure that the money gets spent. As Milton Friedman pointed out 50 years ago, consumers tend to base their spending on “permanent income” — the income they expect to have over the long run — rather than their income in any given year. So an $800 check from the Treasury tends, other things equal, to be mostly saved rather than spent.
How does one get around this?
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