"This paper uses a model with a continuum of equilibrium unemployment rates to explore the effectiveness of fiscal … policy. The existence of multiple steady state unemployment rates is explained by the absence of markets for the inputs to a … high unemployment equilibrium, induced by the self-fulfilling beliefs of market participants about asset prices. Using this …

) do increased government purchases crowd out private consumption? 2) do increased government purchases reduce unemployment … purchases can also reduce unemployment"--National Bureau of Economic Research web site …