Saturday, February 6, 2010
Future tax increases or future spending cuts?
Krugman claims that it is nonsense to argue tightening the budget deficit at this moment of recession. However it is interesting to see that this concern might, in some cases, help the government boost the economy. Meier, Corsetti, and Muller shows a way to enlarge the government multiplier by making people believe that an increase in current government spending will be followed by future spending cuts rather than tax increases.
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