How does a government budget deficit affect the economy?

Answer 1

The main effect (ignoring trade deficits) is that it drives up interest rates...When the government runs at a deficit and has to borrow to cover their expenses, they issue bonds. These bonds, which are considered very safe, compete with other borrowers for the lender's money.

Answer 2

Anjaree is right. government budgets in economics words are linked with balancing spending and gross sales, so if the government overspends throughout a million term, it is going to ought to tax greater interior the destiny to pay for historic spending... of course taxation impacts earning of persons, government spending leads to multiplier outcomes based WHAT the money is spent on. on the political front. a funds is definitely how lots departments GET. So whilst different departments are assigned different costs, it impacts the financial equipment appreciably looking on what branch and what centers are presented. I.e. If Obama have been to minimize spending interior the palms forces to $a million and pump all of it into healthcare; you may get a lot of healthcare in all probability for all people, greater wellness and the final advantageous externalities linked with that, yet according to danger the chinese language might think of u . s . of america is susceptible with a $a million militia funds and invade or something. Or if the government funds for unemployed welfare or unemployed skills retraining gets decreased, you may have great and longer unemployment interior the country. somewhat relies upon on how lots money we are talking approximately, which branch and how that should influence the working of the state or financial equipment.

Answer 3

Think of it this way. How much would your personal budget be affected if you could not control your spending? When the government spends more money than is available in the budget, it affects all of us. To tighten the budget and to attempt to pay off the excess, the government is known to cut services for the elderly and disabled as well as close things, like libraries and schools.

Answer 4

We don't have enough money for general issues. road repairs, our armies, ammenities, etc...no money...no goods or services
they will need to increase taxes, cut goods and services and limit government loans. etc..