APPROPRIATE ALLOCATION OF CURRENT AND CAPITAL EXPENDITURES OF GOVERNMENT TO ACHIEVE OPTIMAL GROWTH RATE IN IRAN

The effectiveness of the current and capital expenditures of government are different to achieve the economic optimal growth rate in Iran. In this paper at first, the aggregate consumption was classified by income groups. Then, the effects of current and capital expenditures of government on the economic growth rate were estimated by a system of simultaneous equations. The results show that the capital expenditures effect is more than current expenditures on economic growth rate. Separation of the consumption function in terms of income groups was useful to calculate income multipliers. In this situation, the results also show that the impact of current and capital expenditures on consumption of different income groups are not the same.