Model
Digital Document
Publisher
Florida Atlantic University
Description
The purpose of this study is to find out the effect of government spending on capital
investments in the American Recovery and Reinvestment Act (ARRA) of 2009 on GDP
and employment growth. This research utilized US quarterly data from 2003 QI to 2013
QII. In the first part the research used variables from the Keynes economic model and
utilized two-stage least square analysis to assess the effect of government spending on
GDP. The results from the regression analysis indicate that an increase of one dollar in
government spending increases GDP by 1.569 dollars. The researcher found that the
general government spending multiplier was 1.9. The coefficient for government
spending in the Recovery Act was 0.383, implying that for every one dollar in
government spending, Recovery Act spending on capital investments contributed 0.383
dollars.
investments in the American Recovery and Reinvestment Act (ARRA) of 2009 on GDP
and employment growth. This research utilized US quarterly data from 2003 QI to 2013
QII. In the first part the research used variables from the Keynes economic model and
utilized two-stage least square analysis to assess the effect of government spending on
GDP. The results from the regression analysis indicate that an increase of one dollar in
government spending increases GDP by 1.569 dollars. The researcher found that the
general government spending multiplier was 1.9. The coefficient for government
spending in the Recovery Act was 0.383, implying that for every one dollar in
government spending, Recovery Act spending on capital investments contributed 0.383
dollars.
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