Walter Weyburn Stimulus Update
Walter Weyburn Stimulus Update. We the people news, is news with truth and common sence. We the people news with walter weyburn.
When politicians refer to "stimulus" they usually mean the government's spending. For economists, stimulus may in part be spending, but not all of it is "stimulus."
Why isn't all spending considered to be the correct type of "stimulus?" We study "stimulus" by looking at its effects, including the magnitude of multiplier effect (additional dollar value resulting from initial spending) and the velocity effect (the rate at which the dollars are circulating in the economy) and whether the impact is immediate. We also consider whether the spending comes from existing revenues from the government or of borrowed dollars, since the two have different ancillary impacts.
In addition, not all "stimulus" is government spending; "stimulus" can be the opposite, tax cuts. Tax reductions, like spending in the sense that they are an application of government revenues. In avoiding revenue when tax rates are reduced the government can encourage spending by the private sector, which when done correctly, could create a significant immediate impact as well as massive multiplier and velocity effect.
The differences in spending and their stimulation effects are vital. What is a simple example of spending which is immediate however has no influence on turn over or multiplier? Let's say you typically drink five glasses of water per day.
Imagine that as a "stimulus" the government paid you to drink an additional six glasses of water today. It has the immediate effect in promoting water production as well as consumption. However, once the glass of water is drunk, there is no multiplier. The only thing that was purchased by the government was just one glass more water than normal. In order to obtain another glass of water, the government must be paid again. When the government stops paying to drink, the drinking stop. Because it doesn't encourage continual drinking by you, or others, there is not a multiplier effect, or any velocity.
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