Question

Deficits and Debt: a)Define and explain what is meant by the Federal Deficit; b)Describe and explain what is meant by the national debt; c) Identify the most recent period in which the U.S. had surpluses and explain why the nation reverted to deficits after that time.

Answer 1

a)A budget deficit refers to spending of government over and above its revenue. If the Federal government spends more than its revenue collected from various sources it is termed as Federal deficit.

b) National debt is the amount of money borrowed by the government internally or externally. In order to cover the budget deficit the Federal government may borrow from internal sources or external sources. Thus a national debt is the total financial liability created by the Federal government through borrowing internally or externally.

c) In 2000 the federal government had a surplus budget of 0.24 trillion U S dollar.

In 2001 the surplus was estimated to 0.13 trillion U S dollar.

After 2001 the Federal budget reverts back to deficit. The deficit reached its peak point from 2009 to 2012. In 2009 the total budget deficit of U S was 1.41 trillion U S dollars, in 2010 the deficit was 1.29 trillion dollar and it was 1.3 in trillion dollars in 2011 and 1.09 in 2012. The budget deficit in 2018 was 0.83 trillion U S dollar.

The increased spending by the U S government is the basic reason of increased deficit. The government spends more of its revenue for the social security measures and for job creation. The budget deficit is reached its highest level in 2009 because of the stimulus package introduced by the government for a recovery of great recession. The war or terror in 2011 also contributes towards galloping of increased government spending on military service. The Afghanistan war and Iraq war also increased the government’s military spending substantially. After social security the U S military expenditure ranks second in the U S spending. Above all the government creates deficit in the budget because the increased government spending will promote longrun growth of the economy.

a)A budget deficit refers to spending of government over and above its revenue. If the Federal government spends more than its revenue collected from various sources it is termed as Federal deficit.

b) National debt is the amount of money borrowed by the government internally or externally. In order to cover the budget deficit the Federal government may borrow from internal sources or external sources. Thus a national debt is the total financial liability created by the Federal government through borrowing internally or externally.

c) In 2000 the federal government had a surplus budget of 0.24 trillion U S dollar.

In 2001 the surplus was estimated to 0.13 trillion U S dollar.

After 2001 the Federal budget reverts back to deficit. The deficit reached its peak point from 2009 to 2012. In 2009 the total budget deficit of U S was 1.41 trillion U S dollars, in 2010 the deficit was 1.29 trillion dollar and it was 1.3 in trillion dollars in 2011 and 1.09 in 2012. The budget deficit in 2018 was 0.83 trillion U S dollar.

The increased spending by the U S government is the basic reason of increased deficit. The government spends more of its revenue for the social security measures and for job creation. The budget deficit is reached its highest level in 2009 because of the stimulus package introduced by the government for a recovery of great recession. The war or terror in 2011 also contributes towards galloping of increased government spending on military service. The Afghanistan war and Iraq war also increased the government’s military spending substantially. After social security the U S military expenditure ranks second in the U S spending. Above all the government creates deficit in the budget because the increased government spending will promote longrun growth of the economy.