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Explain How Government Spending Can Be Helpful in Removing Deficient Demand. - Economics

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Explain how government spending can be helpful in removing deficient demand.

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Solution

Increase in public expenditure on infrastructural development improves the production efficiency of the industries and increases employment opportunities and it encourages private enterprises by initialising state-owned financial and banking institutions to provide cheap credits. This in turn increases the ability to purchase more. In this way, the aggregate demand increases with an increase in the public expenditure.

Concept: Concept of Aggregate Demand and Aggregate Supply
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