Explain various concepts of deficits.
pohnpei397 | Certified Educator
This question is a little vague, but since you seem to have tagged it with economics I will tell you a couple of ways that budget deficits are usually seen by economists:
- Keynesian economists would say that deficits may be necessary during recessions. They say that government deficit spending would stimulate the economy by increasing aggregate demand. Governments should not do deficit spending when not in recession.
- Economists worry about "crowding out" effects of deficits and government debt. They worry that governments will compete for money that is available to be lent. This will cause interest rates to rise and can limit economic growth because businesses and consumers will have a harder time borrowing to invest (businesses) or buy expensive items like cars and houses (consumers).