Question

Congress just passed close to a $500 billion increase in government spending:

A. How will this impact the Federal Deficit and the National Debt? What are the pros and cons of running such a large deficit and debt?   

Answer 1

The increase in the level of government spending by $500 billion will also increase the Federal deficit and national debt. If the expenditure of the government is increasing then the level of national debt goes on increasing. As when the government of a country spends more, then the government falls short of its savings that will contribute towards the increased national debt.
The large level of deficit and debt can have a positive as well as a negative impact on the economy. The high level of deficit and debt will induce a rise in the aggregate demand and will also provide people with more amount of money with them. It will boost the slow-moving economy. On the other hand, there is also a negative impact of the high deficit and debt. The high level of deficit and debt can also increase the risk towards the sovereignty of the nation. The government may have to sell its assets in order to pay for the debts.