What are the effects of deficit spending on the economy of a country? How can constitutional...

What are the effects of deficit spending on the economy of a country? How can constitutional amendment be used to balance the federal budget?

Expert Solution

Deficit spending is something which is used by the government to fulfill the gap between the expenditure over income by purchasing or borrowing the sale of bonds from the public.

The effects of deficit spending on he economy of the country is -

Inflation - An increase in aggregate demand demand occurs due to deficit spending as it increase the aggregate demand which ultimately result in inflation. At the time war this inflation results to be very unproductive as it does adds to the production to be used for the society. The resources gets mobilised as it is maximum is taken over by the miltitary services which results in shortage of consumer goods. The nature of the deficit financing helps to decide whether it is unproductive or productive. If it spend for the society then it may not be inflationary although it will increase money supply.
economic instablity- As we know that inflation is temporary in nature while spending as deficit financing. Total output in the economy exceeds while comparing it to the money supply which generates economic surplus

how can constituinal amendment be used to balance the fedral budget?

The bottom line should be the main focus for constiutional amendment to be used to balance fedral government. zthe government should dollow one approach to balance thr fedral budget. The balance budget allows the government to use it to make the plan the for the budget of the next year and according to which it makes necessary amendments. A state cannot spend more than the income of the government. There should be the balance between the two of them. Higher payment of intrests by the government to pay of thr debts will increase the deficit in th budgets , therfore the constitutional amendment of balancing the fedral budget is used or you can say stops the government to spend more than its income which keeps the balance in the fedral budget.

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Rahul Sunny answered 1 year ago

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