Government spending multipliers increase in recession, boosting economic recovery.
The chapter looks at how government spending affects the economy during recessions. It finds that when the economy is struggling, increasing government purchases has a bigger impact on boosting output. By using a different method to estimate these effects, the chapter shows that the multipliers of government spending are higher in times of recession. This means that during economic downturns, government spending can have a more significant positive effect on the overall economy.