Fiscal-policy Keynesianism generates similar problems as monetary expansion, but in a slightly different fashion. Whereas easy monetary policy distorts interest rate signals and mis-directs private investments, Keynesian stimulus spending directly wastes resources on projects that do not meet the long-run demands of consumers. The fact that labor and capital are temporarily directed to a government project during a recession does not solve the underlying problem that resources need to be arranged in a sustainable fashion in order to meet consumer demands.
Posted on: Mon, 15 Jul 2013 15:29:41 +0000
Trending Topics
Recently Viewed Topics
© 2015