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When the economy has high unemployment, an increase in government purchases creates a market for business output, creating income and encouraging increases in consumer spending, which creates further increases in the demand for business output. (This is the multiplier effect).Please note that a minimum of 700 words for your essay is required.How To Order A Research Paper - Professional Help Birth Order Research Paper, Purchase Essays For College High Quality.Deficit spending refers to government spending exceeding what it brings in federal income and corporate taxes during a certain period.

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Government borrowing under such circumstances increases the demand for borrowing and thus pushes interest rates up.

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