Friday, August 8, 2008

Greg Mankiw's Blog: The View from the White House

Greg Mankiw's Blog: The View from the Heart
10-second macroeconomic review

GDP = Consumption + Investment + Government spending + Exports - Imports = C + I + G + X - M

In summary:

* We think the stimulus is working and increased Q2 consumption and GDP.

* The effects of the first stimulus are not yet complete. Most of the cash is out the door, but we think there will be increased consumption effects this quarter, and a diminishing amount in Q4.

* For many, "second stimulus" is code for "allow Congress to increase politically popular government spending shortly before Election Day, and call it macroeconomic stimulus."

* Increased government spending is slow and ineffective macroeconomic stimulus.

  • The Ripple Effect

  • Spending multiplier
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