Is this from AOS 2 or AOS 3? I haven't heard of this before...
EDIT -
Sorry, I did actually know this, just not under that name. Basically, Keynes was the first to recognise that volatility and instability in the Aggregate Demand and its components were the cause of the cyclical ups and downs in the level of economic activity. Paraphrased from textbook
This is quite a good Keynesian explanation.
But essentially, it is quite common sense. It links back to the macroeconomic factors affecting the volatility of AD. Try for instance, Business confidence.
To keep this post looking short
So, pretend you run a large corporation in Australia. Your in-house economist (backed up by RBA statistics) tells you that the economic future of Australia is projected to downturn. In response to that, you go back to your accountant and tell him that 'No, we're not going to invest in X'.
As this scene is repeating itself throughout most companies in Australia, Aggregate demand (C+I+G+(X-M)) lacks an essential component (I - Private investment), and lowers. The lowering of investments means a coinciding appreciation in the amount of saving in the economy; so not only is there a lack of investment, but the Leakages (see five sector flow model if you are not sure what I'm on about) are rising, due to that increase in savings. According to Keynes, the government is in the best place to halt this.
The easiest way for the government to save this downward trend is increase government spending (G), improving cash flow into the economy and hence absolving the effect of the lower I and the increased leakages.
That's quite a ramble Dissertation, but I hope I actually answered the question, and if not, say so, and I'll try again.. :D