Military Spending and the Economic Outlook

The United States is embarking on an unprecedented increase. in peacetime military spending. The program has prompted heated discussions about the implications of defense spending for real output, employment, and prices. Many economists expect the defense buildup to have a relatively small, yet significant, impact on real aggregate economic activity and price levels over the next few years. Nevertheless, the direct impact of increased military spending on some sectors, such as durable goods, and specific prices should be of much greater significance.