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    Ramifications of Govermental Overspending

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    When looking at our economy, you will find that government spending is very important to our overall output of our economy. What happens if the government is trying to stimulate the economy with their spending, but this leads to a greater output than projected. What are the implications of this over-spending?

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    The overall output of the economy is measured by Gross Domestic Product (GDP). GDP is calculated by:
    Y (output) = C(onsumption spending) + I(nvestment spending) + G(overnment spending) + X(ports) - M(ports).
    This means that an ...

    Solution Summary

    This solution uses the AD-AS macroeconomic model to explain the consequences of government overspending.