Economics question. Please help me...?

Question

Can we increase consumption in a given year without cutting back on either investment or government services? Under what condition?

I need to write short essay...but I'm stuck...please someone help me.

I have to study all day tomorrow.... but have a wonderful Independence day!

Answer 1

I guess you are thinking along the lines of:

Y=C+I+G

and Y=C+S

If you look at the open economy model: Y=C+I+G+(X-M)

you can see that you can increase C by say increasing X. That is if your economy exports more, generates more mioney, then you can afford to consume more without sacrificing I or G.

Answer 2

Even in a closed economy (no X or M) all you need is for consumers to spend some of their savings. Magically C goes up and in an old-fashioned fixed-price Keynesian model without money or interest rates, C rises and GDP rises by a multiple of the "injection."