Deficit Spending

Deficit Spendin" rel="nofollow">ing Order Description Durin" rel="nofollow">ing the Great Recession, like any other economic downturns, as unemployment rises, aggregate in" rel="nofollow">income declin" rel="nofollow">ines causin" rel="nofollow">ing a major declin" rel="nofollow">ine in" rel="nofollow">in tax collections. On the other hand, with the rise in" rel="nofollow">in unemployment, spendin" rel="nofollow">ing on safety net programs rise. So, there are not too many good options available to resort the health of the national economy. It will be very difficult to defend cuts in" rel="nofollow">in the federal government programs and especially the programs geared to sustain" rel="nofollow">in the min" rel="nofollow">inimum of the standard of livin" rel="nofollow">ing for the recent “poor.” So, government needs to in" rel="nofollow">increase its borrowin" rel="nofollow">ing. Deficit spendin" rel="nofollow">ing refers to government spendin" rel="nofollow">ing exceedin" rel="nofollow">ing what it brin" rel="nofollow">ings in" rel="nofollow">in federal in" rel="nofollow">income and corporate taxes durin" rel="nofollow">ing a certain" rel="nofollow">in period. Deficit spendin" rel="nofollow">ing hence in" rel="nofollow">increases government debt. Most economists accept that deficit spendin" rel="nofollow">ing is desirable and necessary as part of countercyclical fiscal policy. In such a case, government in" rel="nofollow">increases its borrowin" rel="nofollow">ing and hence its deficit to compensate for the shortfall in" rel="nofollow">in aggregate demand. This is derived from Keynesian economics, and has been the main" rel="nofollow">instream economics view. Followin" rel="nofollow">ing John Maynard Keynes, many economists recommend deficit spendin" rel="nofollow">ing to moderate or end a recession, especially a severe one. When the economy has high unemployment, an in" rel="nofollow">increase in" rel="nofollow">in government purchases creates a market for busin" rel="nofollow">iness output, creatin" rel="nofollow">ing in" rel="nofollow">income and encouragin" rel="nofollow">ing in" rel="nofollow">increases in" rel="nofollow">in consumer spendin" rel="nofollow">ing, which creates further in" rel="nofollow">increases in" rel="nofollow">in the demand for busin" rel="nofollow">iness output. (This is the multiplier effect). This raises the real gross domestic product (GDP) and the level of employment and lowers the unemployment rate. Government borrowin" rel="nofollow">ing under such circumstances in" rel="nofollow">increases the demand for borrowin" rel="nofollow">ing and thus pushes in" rel="nofollow">interest rates up. Risin" rel="nofollow">ing in" rel="nofollow">interest rates can "crowd out" (discourage) fixed private in" rel="nofollow">investment spendin" rel="nofollow">ing, cancelin" rel="nofollow">ing out some of the demand stimulus arisin" rel="nofollow">ing from the deficit Write an essay analyzin" rel="nofollow">ing the advantages and disadvantages of deficit spendin" rel="nofollow">ing and the effects of federal government borrowin" rel="nofollow">ing on the economy i.e., the “crowdin" rel="nofollow">ing out” effect. Your paper should be structured as follows 1. Cover page with a runnin" rel="nofollow">ing head 2. Introduction: What is deficit spendin" rel="nofollow">ing and how does it work. 2.1. Advantages 2.2. Disadvantages 3. Crowdin" rel="nofollow">ing-out Effect 4. Conclusions: Do you believe that deficit spendin" rel="nofollow">ing helps or hin" rel="nofollow">inders short-term and long-term economic growth? 5. References