pump priming

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An addition to aggregate demand generated by a government in order to set off the multiplier process. It usually involves allowing government expenditure to exceed receipts, creating a budget deficit. Pump priming was widely used by governments in the post-war era in order to maintain full employment; however, it became discredited in the 1970s when it failed to halt rising unemployment and was held to be responsible for inflation.

Subjects: Financial Institutions and Services.

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