Goods market:  Increase in government spending to reach full employment
Channel: Werner Lost
Date: 2012-01-21

By how much government spending must increase depends on the output gap and the multiplier.  If the output gap is 1000 and the multiplier is 5 then the increase in government spending must be 1000/5 = 200.

The impact of an increase in government spending is the same as that for any other increase in autonomous spending in that it has a multiplier effect on the equilibrium level of output and income.