Question

What would happed to the creation of jobs if the government deficit gets too high? How would it impact economic growth?

Answer 1

Job creation is the process by which the number of in an economy increases, it often refers to government policies intended to reduce unemployment. A budget deficit occurs when expenses exceed over revenue and it indicates the financial health of a country. A government experiences a fiscal deficit when it spends more money than it takes in from taxes and other revenues. An increase in fiscal deficit can boost a sluggish economy by giving more money to people who will in turn invest it, but a long term deficit can be detrimental for economic growth and stability. The government may try to reduce the deficit by job creation, for the economic growth more job creation will help, growth will mean more jobs and higher wages. Hence when there is deficit, government may tend to more job creations.

A high government deficit may have few impacts on economic growth, they are:

• The rise in national debt
• Higher debt interest payments
• Increase in Aggregate Demand
• Possible increase in public sector investment
• May cause crowing out and higher bond yields