Government spending boosts economy, lowers inflation, and increases employment.
The article explores how government spending affects the economy in times of change. It finds that when government spending boosts production, it can lead to higher private consumption, wages, and employment. This is especially true when the government doesn't rely too much on taxes and uses public debt wisely. In these cases, inflation tends to decrease, and people are more likely to spend money. However, if monetary policy isn't active, government spending may crowd out private consumption. The study shows that the interaction between government spending and monetary policy is crucial for understanding how these policies impact the economy in the short term.