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Description
We currently assume that goods/services making up government consumption expenditures are produced from just one industry (namely, industry
However, given data from an input/output table, it would be trivial to find demand for output from any sector
Analogous to how we model differentiated consumption goods, we can have a unit of gov't expenditures be made up of outputs from different sectors using a fixed-coefficient matrix. E.g., demand for industry
where
The price of a unit of gov't consumption will then be:
Government spending in the government's budget constraint, currently