Originally Posted by licence2kill
What do you think a multiplier is? If the multipler is 5 then that was extremely efficient spending that made us all a lot richer.
I just don't understand what's confusing you...
Oh my god. I seriously learned this in econ 101.
GDP is the measure of activity in the economy. GDP in that example is $100 higher. This does not mean people are $100 "richer".
Government spends $20. Gives it all to you.
You like to spend money so you say screw it I am going to blow it all and you buy an xbox for $20.
Then that same $20 is spent by an employee who was paid by the best buy you bought it from and all $20 is spent on candy.
You are no richer. the other guy is no richer and GDP is from consumption is $40 + GDP from government spending is $20 so GDP is $60 with only $20 in the economy. Therefore you cannot tax $60.