Fiscal Deficit

Fiscal Deficit

Governments run fiscal deficits when their total expenditures in a given year exceed their total revenues. Fiscal deficits are plugged by borrowing. Over time, deficits can be reduced by cutting public spending, raising taxes or a combination of both. Running a deficit is not always necessarily a bad thing if expenditure is allocated to productive areas of the economy such as infrastructure that will yield future benefits as well as provide employment.

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