Keynes didn't believe that government stimulus would work if the money multiplier was less than 2. For example:Under conditions such as the Great Depression, Keynes argued that this approach would be relatively ineffective compared to fiscal policy. But, during more "normal" times, monetary expansion can stimulate the economy. -- Wikipedia.
During our own Great Recession, the multiplier has been below 1.0! And still declining....
posted on 08/15/2011 1:42:27 PM PDT
“Keynes didn’t believe that government stimulus would work if the money multiplier was less than 2.”
The multiplier is always negative. When the government spends, the private sector and the economy contracts. Keynes was wrong.
posted on 08/15/2011 2:09:27 PM PDT
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson