When expansionary fiscal policy is contractionary: A neoklassikal scenario
The paper presents a simple theoretical account of how an increase in government purchases may reduce total employment. It is shown that in a 'neoklassikal' model - in which utility maximising consumption choices are combined with a fixed-coefficient technology - an increase in government purchases will reduce the demand for labour at the given wage rate. The reasoning turns on the link between optimising consumption behaviour and employment in the investment sector. An increase in G will (as a...[Show more]
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