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How is wealth ultimately created? Would it matter whether one spent a dollar on bus fare, or a luxury watch? Or is the answer simply dependent upon which contributes more to overall investment in new technologies, efficiency, etc. (whatever drives wealth creation) – and this could be consumer spending or business resources.
Professional Wine Opener
How is wealth ultimately created? Would it matter whether one spent a dollar on bus fare, or a luxury watch? Or is the answer simply dependent upon which contributes more to overall investment in new technologies, efficiency, etc. (whatever drives wealth creation) – and this could be consumer spending or business resources.
Professional Wine Opener
Women Hormone
Yes it matters, but not as much as spending vs. not spending, especially as you are referring to consumer spending.
For example, government spending on military hardware creates much less economic growth, both in the short term and the long term, than money spent on schools and education.
All other things being equal, money spent on services and on labor intensive goods has a higher multiplier effect than money spent on capital intensive goods such as cars and electronics. It is also the case that goods with higher local content have a higher multiplier effect than goods with lower local content.
Thus, for a government wanting to stimulate the economy, it matters how it does so. Simple tax cuts for the rich (1.03) and payroll tax cuts for corporations have less stimulus value (1.29) than increasing foodstamps (1.73) and extending unemployment benefits (1.64).