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A Temporary Federal Discount Program to Stimulate Consumer Spending

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  • Kenneth Lewis
  • Laurence Seidman

Abstract

In this paper, we evaluate a new proposal to stimulate recovery from the current recession: a temporary federal price discount on consumer goods. An attractive feature of the temporary federal discount program is that it gives consumers a price incentive to purchase more rather than simply giving consumers more disposable income, which they might choose to either spend or to save. According to our simulations with the Fair macro-econometric model, a temporary 20 percent federal discount on all consumer goods in a severe recession would significantly reduce the unemployment rate while causing only a small increase in federal debt as a percentage of GDP.

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  • Kenneth Lewis & Laurence Seidman, 2010. "A Temporary Federal Discount Program to Stimulate Consumer Spending," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 45(4), pages 244-252, October.
  • Handle: RePEc:pal:buseco:v:45:y:2010:i:4:p:244-252
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