This project is supported under the Research in Undergraduate Institutions Program. The purpose of this research is to analyze the substitutability of public and private spending in the United States. This is a very important issue because the degree of substitutability has major implications for macroeconomic policy. If consumers view public outlays as close substitutes for their own personal expenditures, then increases in government spending could result in commensurate decreases in private spending, nullifying the expansionary impact of the fiscal policy. The project will examine this issue at the disaggregated level. Statistical analyses looking for significant correlations between the different components of government and consumer expenditures will be undertaken. This will help to determine what underlies the aggregate relationship between public and private spending. The plausibility of the correlations at the disaggregated level should help determine whether any relationship that exists at the aggregate level is reasonable or is the result of spurious correlation.
