When aggregate demand increases, the price level, output and employment in the economy will increase. The government would also be borrowing money to increase its spending. Government could create projects such as building hydroelectric plants or highways. This spending would cause the orders for products such as concrete, etc. to increase. Businesses would fill these orders and in doing so call people back to work.
Government spending is a component of aggregate demand.
By increasing aggregate demand in the intermediate range of the aggregate supply curve there is pressure upward on prices as well as an increase in output and employment. The opposite of the above steps would result in slowing the economy. Note the following line of code and graphs to help students remember the cause and effect steps of fiscal policy. There are limitations associated with the performance of fiscal policy. Most notably would be politics.