Quote:
Originally Posted by Happy recluse
I have heard of this by listening to Paul Krugman and Nancy Pelosi, but I'm afraid I have no idea what it means. If the government gives Smith a food stamp worth $1, and Smith buys a loaf of bread (on sale) for $1, how does that transaction stimulate the economy beyond $1?
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The person buys food at a supermarket. The supermarket makes some profit, pays their employees a little, pays property taxes, the power company gets paid, and pays some taxes in employee salaries.
The farmer (or food producer) who sold the grocer the food gets paid, the company they get their equipment, seed, etc gets paid...
It is the velocity of money and getting the dollars circulating in the local and national economy helps more than spending dollars on oil/gas from big oil companies and countries around the world.