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- Title
THE EFFECT OF THE CHANGING SIZE AND COMPOSITION OF GOVERNMENT PURCHASES ON POTENTIAL OUTPUT: A REPLY.
- Authors
von Furstenberg, George M.
- Abstract
The article focuses on the effect of the changing size and composition of government purchases on potential output. The author replies to the comments made by professor Bradford G. Reid on his work on the subject. In his comment, Reid isolates a single relation, the private saving function, and the implied consumption function for privately purchased goods and demonstrates that deficit financing crowds out investment in a manner that is quite evident from this single specification in my model and not beholden to the more elaborate economic analysis offered. According to the author, this is not helpful as both aggregate demand and supply and steady-state relationships, disregarded by Reid, were utilized in his paper to show a variety of possible outcomes that depend on policy linkages and parameter values not transparent from equation. Contrary to the main thrust of the author's paper, Reid appears to be particularly interested in the special case where changing the deficit has no effect on the relative size of government spending, its distribution between consumption and investment goods, or the notional benefits per unit of the former.
- Subjects
GOVERNMENT purchasing; INPUT-output analysis; PRODUCTION control; INDUSTRIAL organization (Economic theory); REID, Bradford G.; PUBLIC spending; SAVINGS; CONSUMPTION (Economics); EQUATIONS
- Publication
Review of Economics & Statistics, 1982, Vol 64, Issue 3, p527
- ISSN
0034-6535
- Publication type
Article
- DOI
10.2307/1925957