Question

Why are budget deficits bad for productivity growth?

(Expert from pakistan please reply)

Answer 1

Budget deficit occurs when goverment expenditure is more or higher than the goverment revenue . It means that goverment has to borrow money to finance the deficit. The formula of budget deficit as follows:-

(Expenditure>Reciepts) , under expenditure two more sub-heading are there a) revenue expenditure, b) capital expenditure . In same under under receipts two more sub headings are there:-a) revenue receipts b) capital receipts .

Mainly goverment budget are of three types :-

A) Balanced budget

B) surplus budget

C) deficit budget

So, in the period of budget deficit the production growth is bad beacuse in these goverment expenditure is more over goverment receipts. In these period goverment doesnot want to make investment in production or increase in economic growth.