And once again we come to the
GDP calculating principle which clearly defines how government spending contributes to the economic output.
If the government spends an additional dollar then $1 is added to GDP. If as a result of the additional borrowing the government needs to borrow as a result of this additional $1 in spending the private sector will spend (lets say) $0.01 less, therefore GDP would decline by $0.01. The net effect in this scenario is that government spending goes up by $1.00 but GDP only goes up by $0.99.
That's a good explanation, but I don't see any reason why the increase in GDP is necassirily lower than additional government spending.
Keynes introduced a term to describe this effect:
fiscal multiplier.