In our construction of the savings and investment model, we
considered government spending to be immediate spending. In other
words, there was no “investment” component to government spending.
Let’s change up that assumption. Suppose government spending comes
in two types: investment spending (new airports, for example) as
well as government consumption (snow plowing, for example). Call
the first GI and the second GCE.
a. Derive the savings and investment equations under this new
assumption and prove, once again, that in...