Paper Topic:

Economics

An increase in governmental spending is applied in a period of economic recession because it is believed such a form of investment would create new jobs , increase production in the industries towards which the spending is targeted and that it would create a positive emulation leading to an overall increase in the GDP

The fact that the increase in governmental spending was targeted towards defense , education and infrastructure led to a smaller increase of GDP than the one initially estimated due to several factors . First of all increasing governmental spending in education

is certainly not likely to produce positive results for the economy in the short-term , in the 18 months mentioned . Indeed , increasing spending in this sector will likely produce more efficient and more productive employees in the next 5-10 years , that is , the period after which the current pupils and students will enter the workforce market . The increased level of educational component , due to increased governmental spending in this area (better technology in school , better courses , cheaper classes etc , will mean that the generation benefiting from this will be more prepared for work , more able to produce more etc . This will , at that respective point , increase GDP

On the other hand , the defense industry and governmental spending in this area is not the kind of industry that will likely trigger the effervescence of other industries and , hence , an overall increase of GDP towards the reduction of the recession period . Governmental spending in general , should be targeting programs and industries that are likely to create new jobs and new businesses in as many collateral sectors as possible . The defense industry is not really this type of industry . It does create a limited number of new jobs , for specialists , but it only encourages a very applied type of research , not necessarily beneficial to other industries . Investment primarily in the defense will not create a proper emulation for other sectors of the economy and this is likely why the estimates were more optimistic than the actual real data

The only industrial sector that could stimulate most areas of the economy and have a real impact on the GDP would be the national infrastructure . The reason for this is determined by the fact that a better infrastructure means that goods and products are easier to transport from place to place and that will increase the efficiency of industrial processes in the economy

On the other hand , we need to consider the fact that increasing governmental spending in the areas mentioned , will not positively stimulate the supply of products and services on the market , which could , in turn , trigger an increase in overall aggregate demand . The defense industry doesn 't even produce such products adaptable to being offered on the domestic market in an attempt to increase population demand

Finally , governmental spending is not the single working solution in the case of an economic recession . Measures such as the ones mentioned need to be doubled by efficient monetary and financial means , such as reducing...

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