<p>I try to answer, but I'm not sure of understanding your question.
You'd better, when you post a question, be more specific, for instance writing the equations you are referring to.</p>
<p>I can suppose that you refer to the equation that defines aggregate demand, AD (in a closed economy):</p>
<p><span class="math-container">$AD=C+I+G$</span>,</p>
<p>where  <span class="math-container">$C$</span> is consumption, <span class="math-container">$I$</span> is investment and <span class="math-container">$G$</span> is government expenditure.</p>
<p>So, <span class="math-container">$G$</span> is a component of the aggregate demand, besides <span class="math-container">$C$</span> and <span class="math-container">$I$</span>. If <span class="math-container">$G$</span> increases, on the right side of the equation, <span class="math-container">$AD$</span>, on the left side, increases by the same amount, by definition.</p>
<p><strong>Be careful:</strong> transfer payments are not a component of aggregate demand, but in national accounts they are accounted as negative taxation.</p>

CC BY-SA 4.0
2022-09-11T11:05:03.040Z
2022-09-11T11:05:03.040Z
BakerStreet
<p>I know that governments can increase demand by increasing employment, transfer payments, and capital for the private sector.</p>
<p>Why does government spending increase by the &quot;&quot;same&quot;&quot; amount as demand?</p>
<p>Thank you.</p>

CC BY-SA 4.0
2022-09-10T17:21:56.130Z
I am not sure it all does: for example for transfer payments, the recipients may use part to save or to pay down existing debt, so reducing the amount of additional consumption to below the additional government spending.  Similarly capital grants to the private sector may either replace some amounts that might otherwise have been financed privately, or might stimulate additional private investment to an amount greater than the grant and the amount which would otherwise have happened
Henry
CC BY-SA 4.0
2022-09-11T06:40:39.583Z
Hi, thanks a lot for your answer!
student
<macroeconomics><labor-economics><economic-growth><international-economics>
Why does the government spending increase by the "same" amount as the demand?
student
# Why does the government spending increase by the "same" amount as the demand?

(Asked by: username_0 on 2022-09-10)

I know that governments can increase demand by increasing employment, transfer payments, and capital for the private sector.

Why does government spending increase by the ""same"" amount as demand?

Thank you.

**Tags:** macroeconomics, labor-economics, economic-growth, international-economics

> **Comments:**
> **username_1**: I am not sure it all does: for example for transfer payments, the recipients may use part to save or to pay down existing debt, so reducing the amount of additional consumption to below the additional government spending.  Similarly capital grants to the private sector may either replace some amounts that might otherwise have been financed privately, or might stimulate additional private investment to an amount greater than the grant and the amount which would otherwise have happened  
> **username_0**: Hi, thanks a lot for your answer!  

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## 1 answers

### Answer by username_2 on 2022-09-11. Score: 0

I try to answer, but I'm not sure of understanding your question.
You'd better, when you post a question, be more specific, for instance writing the equations you are referring to.

I can suppose that you refer to the equation that defines aggregate demand, AD (in a closed economy):

$AD=C+I+G$,

where $C$ is consumption, $I$ is investment and $G$ is government expenditure.

So, $G$ is a component of the aggregate demand, besides $C$ and $I$. If $G$ increases, on the right side of the equation, $AD$, on the left side, increases by the same amount, by definition.

**Be careful:** transfer payments are not a component of aggregate demand, but in national accounts they are accounted as negative taxation.


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