> Where did you get the idea that disposable income increases for everyone? How could that be even possible?
The government could be printing money to make that possible, as well, instead of financing it through taxes only.
The government could be printing money to make that possible, as well, instead of financing it through taxes only.
A government that didn't spend any money while collecting taxes would create massive deflation and markets wouldn't clear. On the other hand, a government that didn't collect any taxes and simply spent the money would create inflation.
If for the increase in money supply there is a corresponding increase in GDP, there is no real inflation since the money is chasing more goods and services.
The increase in demand would happen mainly because the MPC multiplier of poor people is higher http://en.wikipedia.org/wiki/Marginal_propensity_to_consume
Guess what - that means more poor people getting what they need, before rich people get to fund golden toilets or something. And yes, I will think this way even when I am a billionaire.