Analyse how an increase in government spending may create economic growth

see below

Explanation:

An increase in government spending is an expansionary fiscal policy applied to stimulate economic growth. The government increases spending by engaging in capital and labor-intensive projects such as the building of public roads, bridges, schools, hospitals, railway lines, airports, and other public goods.

Since these projects are labor-intensive, they create employment for many people. It means previously unemployed people will have an income. The workers will spend their new income buying goods and services in the market, resulting in a general increase in demand.  As demand increases, production increases resulting in a higher GDP.

The projects also consume many materials ranging from steel, timber, cement, and many others. The demand for materials will increase, resulting in higher production and an increase in employment.

An increase in government spending creates employment, increases income and aggregate demand resulting in increased economic activities and a higher GDP.

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