Investment get crowded in by kind of government spending

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Assume that the temporary increase in government purchases is for infrastructure like sewers or roads rather than for military purposes. The government spending on infrastructure makes private investment more productive. Use the saving-investment diagram for a closed economy to analyze the effects of government infrastructure spending on equilibrium natial savings, investment, and real interest rate. Can private investment get "crowded in" by this kind of government spending?

Reference no: EM131085918

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