The effect of government spending on the economic cycle: An alternative vision
Keywords:effective demand, economic fluctuations, unemployment, fiscal policy, keynesian multiplier
In this paper, we built a general equilibrium model in order to analyze how the prices and allocations are changed by the government consumption which is financed with debt. It is shown the period in with the government spending the employment and output increase. However, in subsequent periods will put the economy on a path of growth (decline), if government spending generated more (less) resources than required to finance.