After effect on economic growth. However, whether

After an economic crisis in 1998-1999, Indonesia has been slowly recovering, shown by the relatively stable exchange rate, increasing economic growth and controlled inflation. It is obvious that this stable and positive economic growth is one of the government’s main aims, and it is achieved by many means, including the application of fiscal policy seen by the year-by-year increase in government expenditure since the early 2000s. Bank Indonesia released details regarding government finances and the state budget from the years 2009 to 2016, showing the yearly increase in expenditure. ?Sustainable economic growth is a government macroeconomic objective defined as the increase in Real GDP or output in an economy. Real economic growth is when increase in GDP is more than the increase in inflation rate. Economic growth can be distinguished as either actual growth, which is the increase in real GDP and caused by an increase in aggregate demand, or potential growth which is the increase in the country’s productive capacity and is instead caused by an increase in aggregate supply. Actual growth can be seen as an outward shift in a production possibility curve (Graph 1), while potential growth is a shift in LRAS (Graph 2). Graph 1                                                                                       Graph 2?Aggregate demand can be shown using the formula AD=C+G+I+(X-M), where C stand for consumer spending, G for government expenditure, I for investment, X for exports and M for imports. Seeing as economic growth is caused by an increase in aggregate demand and with how the calculation of AD comprises of government spending, we can see that government spending has an effect on economic growth. However, whether that effect is positive or negative is often debated. Al-Shatti (2014) has drawn results where government spending does not significantly impact economic growth in Jordan, whereas Alshahrani and Alsadiq (2014) examined Saudi Arabia and found evidence of government expenditure being able to help stimulate economic growth.