1.25 Stimulating Debate Should the government hire people to bury banknotes down disused mineshafts, so that private firms can hire yet more people to dig them up again? Keynes said that there are circumstances in which government spending as wasteful as this could nevertheless be beneficial.

Source: Financial Times, 30 October 2010 Explain and draw a graph to illustrate the effect of the activities described in the news clip on equilibrium expenditure, real GDP and the price level and contrast the outcomes for

(a) an economy with considerable unemployment and

(b) an economy that is close to full employment