ABSTRACT
This chapter explains how economists measure the impact of the public sector of the economy. It provides the theoretical support for the analysis of the economic impact of the Vietnam War that was the basis for an extensive set of congressional hearings and a two-volume compendium on the subject. The economic impact of a government spending program may occur at the time the disbursements are made or, depending on the nature of the program and the state of the economy, during earlier stages of the governmental spending process. In the absence of governmental assistance, there may be substantial financial as well as technological limits to large-scale expansion of production on government orders. Placing contracts and incurring other obligations may not always signal the onset of production. The needed production facilities may not be readily available or backlogs of orders may first have to be worked off. Also additional working capital may be required.
