Government expenditures fund construction of a high-rise office building on a pl

Question

Government expenditures fund construction of a high-rise office building on a plot of land where a private company otherwise would have constructed an essentially identical building. The U.S. government is in the midst of spending more than $1 billion on seven buildings containing more than 100,000 square feet of space to be used for study of infectious diseases. Prior to the government's decision to construct these buildings, a few universities had been planning to build essentially the same facilities using privately obtained funds. After construction on the government buildings began, however, the universities dropped their plans. Evaluate whether the government's SI billion expenditure is actually likely to push U.S. real GDP above the level it would have reached in the absence of the government's

Explanation / Answer

The government expenditure signals towards a growing economy . When the government expenditure raises by $ 1 million means a growth in AD because there investment demand in the country .With high investment there is growth in both output and employment , with rise in output employment increase income increases and people will have a better purchasing power that shall boost real gdp growth rate eventually .

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