Question

How does governments prefer to use transfer payments for deflationary deficit compared to preferring to spend?

Answer 1

The problem with transfer payments is that it does not take advantage of the multiplier effect. Udring recession, governments should vut back on transfer payments which the government deem unecessary, and use it as government expenditure in infrasturcture or contractual payements which increases the money supply in the economy and as well as take advantage of the multiplier effect. So government will decrease trnasfer payments and increase government expenditure.

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