econ - Running Head GOVERNMENT SPENDING AND ITS ANALYSIS...

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Running Head: GOVERNMENT SPENDING AND ITS ANALYSIS USING IS-LM MODEL 1 GOVERNMENT SPENDING AND ITS ANALYSIS USING IS-LM MODEL Name: Institution:
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GOVERNMENT SPENDING AND ITS ANALYSIS USING IS-LM MODEL 2 Economic theories do not automatically deliver robust conclusion about the impact of government spending on the overall economic performance. In some cases, lower levels of government spending would sometimes enhance the economic growth. In other situations, increased government spending would also enhance economic growth hence desirable. Government spending is necessary for the economic stabilization of the nation. The economic growth is minimal when the government is not spending. However, at some point the government spending becomes a burden. This may be as a result of misallocation of funds or the government becomes too large.in this case, the government spending and cost outweighs the benefits. Excessive government spending results to the extraction cost. The federal government will be forced to take loans to finance the big budgets. Borrowing devours capital which was available for private investment. If the government spends more money, it will lead to displacement cost.
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