The consultant's analysis is correct. When the residents will spend money on roof repairers who in turn will spend their income on other goods, the aggregate spending in the economy will increase. This increase in spending would further expand production in the economy and through multiplier effect, the output of the country will rise.
Looking through IS-LM, the IS curve would shift to right because of increase in consumption,C. Therefore,there would be more output in the economy.
Imagine a hailstorm damages a large number of roofs in Lubbock. A consultant for the Lubbock Chamber of Commerce writes a report on the impact of the storm on Lubbock’s economy. In the report, the co...