budget deficits -k8凯发

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ilovesuica dec 25, 2020

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what is a budget deficit?
1. cccurs when government expenditures exceed revenues from taxes and other sources.
2. public savings are also referred to as budget surplus. when public savings are negative, the government is said to be running a budget deficit.
components
1. revenues
2. expenses
implications
1. increase aggregate demand
2. boost the economy during a recession
3. increase government spending
4. fiscal policy
5. higher taxes in the future
6. higher interest rates and bond yields
theories
1. ricardian equivalence theory
  1. argues that using budget deficit or borrowing to stimulate the economy exerts no effect.
2. crowding out theory
  1. an increase in government spending and borrowing leads to a decrease in investments from the private sector.

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