How does a budget deficit differ from the national debt? What are the types of lags encountered when using fiscal policy? Which of the types do you think is the most realistic? Explain your reasoning. Explain some consequences of pursuing a balanced budget during a severe economic contraction and its implication for the size of a multiplier of your choice.
Unit 6 Discussion
Difference between Budget Deficit and National Debt:
Budget Deficit: A budget deficit occurs when a government's expenditures exceed its revenues in a given fiscal year. It represents the amount of money the government needs to borrow to cover its spending during that period.
National Debt: The national debt, on the other hand, represents the cumulative total of all past budget deficits minus any surpluses. It reflects the total amount of money owed by the government to its creditors at a given point in time. In essence, budget deficits contribute to the national debt over time.
Budget Deficit: A budget deficit occurs when a government's expenditures exceed its revenues in a given fiscal year. It represents the amount of money the government needs to borrow to cover its spending during that period.
National Debt: The national debt, on the other hand, represents the cumulative total of all past budget deficits minus any surpluses. It reflects the total amount of money owed by the government to its creditors at a given point in time. In essence, budget deficits contribute to the national debt over time.