The Impact Of Government Expenditure In People’s Livelihood On Macro-economy Under The Framework Of Neoclassical DSGE Model

Since the reform and opening up,China has achieved rapid economic development.GDP increased by nearly 174 times and has become second station among the world’s GDP.However,China’s per capita income levels in the world rankings have accounted for 90 or so.China is still a developing country.The standard of living of our country is far behind developed countries.All this makes people not able to really enjoy the economic fruits of development.People’s"happiness" is still not reached to the level of economic development.The result of rapid economic development doesn’t feedback effective to people.The government pays a high attention on livelihood issues.Government expenditure in people’s livelihood is an important tool for state to achieve the goal "to protect and improve people’s livelihood".Meanwhile,the size and structure of government spending also affects people’s livelihood living standard and macroeconomics.DSGE model is based on microeconomics,making a combination between theory and real economics.It has become one of the main analytical tools used in research macroeconomic issues.Therefore,this paper established a neoclassical DSGE model that contains the household sector,the productive sector and government departments.Government expenditure in people’s livelihood is divided into consumer spending in people’s livelihood,investment spending in people’s livelihood,transfer spending in people’s livelihood.This article research the key macroeconomic variables changes such as consumption,output,employment,investment in these types of government spending in people’s livelihood,in order to analyze the impact of government spending in People’s livelihood on macroeconomic livelihood.The neoclassical DSGE model established in this paper can give a better explanation of the changes of reform and opening up economic.The impact of different types of expenditure in people’s livelihood is not same.Although increase transfer spending in people’s livelihood and investment spending in people’s livelihood can promote output and investment,transfer spending in people’s livelihood makes a decline in employment.Because of the existence of negative wealth effect,consumer spending in people’s livelihood has a negative effect on consumption.Therefore,the government should make a reasonable choice on expenditure in people’s livelihood to make the increase expenditure not only promote economic development but also make the fruits of economic development to benefit the people.