<p>Generally government purchase would have effect on the price of goods in the market (the "crowding out" effect). The question is just saying that <span class="math-container">$c$</span> and <span class="math-container">$\ell$</span> are not functions of <span class="math-container">$g$</span>.</p>

CC BY-SA 4.0
2019-08-30T02:55:25.700Z
2019-08-30T02:55:25.700Z
Art
<p>I can't get a homework problem started due to wording. I desire to understand it, so I will only put down enough to show my line of thought.</p>

<p>we have a utility function to maximize, say <span class="math-container">$u(c,\ell)$</span>, and some production function <span class="math-container">$Y=zF(K,L)$</span>. The government purchases <span class="math-container">$g$</span> units of the consumption good using a lump-sum tax <span class="math-container">$\tau$</span>.</p>

<p>My question: the problem states "government purchase does not enter consumer's utility."</p>

<p>Does this mean that we do <span class="math-container">$\max_{c,\ell}u(c,\ell)$</span>, relating <span class="math-container">$c=\ldots - \tau$</span>, and do not do <span class="math-container">$\max_{c,\ell} u(c,\ell) + \phi(g)$</span>, also with some relation?</p>

<p>Thanks for any clarification </p>

CC BY-SA 4.0
2019-08-30T02:16:12.120Z
I think your understanding is correct.
Herr K.
CC BY-SA 4.0
2019-09-06T10:51:30.653Z
I'm voting to close this question as off-topic because it is about interpretation of wording of a (homework) problem, not about economics
Maarten Punt
<macroeconomics>
The equilibrium effects of a change in government purchases on consumption
Tainted G
# The equilibrium effects of a change in government purchases on consumption

(Asked by: username_0 on 2019-08-29)

I can't get a homework problem started due to wording. I desire to understand it, so I will only put down enough to show my line of thought.

we have a utility function to maximize, say $u(c,\ell)$, and some production function $Y=zF(K,L)$. The government purchases $g$ units of the consumption good using a lump-sum tax $\tau$.

My question: the problem states "government purchase does not enter consumer's utility."

Does this mean that we do $\max\_{c,\ell}u(c,\ell)$, relating $c=\ldots - \tau$, and do not do $\max\_{c,\ell} u(c,\ell) + \phi(g)$, also with some relation?

Thanks for any clarification

**Tags:** macroeconomics

> **Comments:**
> **username_1**: I think your understanding is correct.  
> **username_2**: I'm voting to close this question as off-topic because it is about interpretation of wording of a (homework) problem, not about economics  

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## 1 answers

### Answer by username_3 on 2019-08-30. Score: 0 | Accepted answer

Generally government purchase would have effect on the price of goods in the market (the "crowding out" effect). The question is just saying that $c$ and $\ell$ are not functions of $g$.


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