Question

How budget deficits and national debt are defined?

Is it a good policy for the government to create budget deficit? Why and why not?

Answer 1

The answers are as follows,

Budget deficit:

This is a situation where the amount of spending by a government/nation exceeds the amount of revenue generated through its Operations. This may be balanced by increasing the revenue generation or by reducing the spending activities so that the deficit will be balanced.

National debt:

National debt is defined as the amount of money that the government owes to the creditors. This can also ve defined as the amount of debt the government is liable to pay to the people.

Is budget deficit good:

Budget deficit is definitely not a good one to the economical development of a country. If a budget deficit occurs it will lasts for a minimum period of 6 months and it's effect remains for a minimum period of 2 years and as a result the economic growth of the nation will be suspended. Sometimes government releases money to control the budget deficit but it will lead to increase in inflation rate in the economy which further will have an impact on the growth of the nation.