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What quantity of public goods should the government produce?

What quantity of public goods should the government produce?

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Answer #1

Government procurement depends upon the situation prevailing in the economy. If the economy is going through a crisis period the government need to procure more and increase the demand in the economy. This increased procurement will increase the level of output and employment in the economy and help the economy reach the equilibrium back.

If the economy is going through an increased activity i.e. the output is good and employment is at a high level. In such a situation the government procurement will increase the inflation in the economy.

Generally, government procurement has to maintain a balance between the output and inflation in the economy and decided it procurement level.

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