Hi

Question-2: Traditionally, government spending (public investment) is regarded as an efficient way of coping with recessions.However, some economists argue that Public investment cannot produce expected results due to 3 reasons;Crowding- out effect, Foreign trade effect, and inflation effect.They claim that those 3 effects reduce the size of the multiplier and thus reducing the GDP impact expected Public Investment.

Demonstrate these three situations with graphical illustrations and evaluate the efficiency and reliability of dependence on government spending only in the face of crisis.