The full employment theory of the classical school has been proved wrong by the real life experiences of the world since the Great Depression. Though the Keynesian theory of the possibility of both full as well as below full employment equilibrium has the limitations of ignoring the role of expectations and policy lags, among others, its prescription of enlarging the effective (aggregate) demand to remove unemployment is still valid. For a developing economy, a relatively easy way to expand aggregate demand would be through an increase in government expenditure financed through raising external debt. Thus, external debt, to the extent it is sustainable, could be a way to alleviate the problem of unemployment and to push up growth.