On the other hand, with the rise in unemployment, spending on safety net programs rise. This usually makes the investors more confident … By running a deficit, a government is able to spread distortionary taxes over time. If there is a downturn in the economy, there will automatically be a fall in taxation and higher govt spending on benefits, this will cause a budget deficit. share. The government uses the money it acquires through borrowing to fund infrastructure development and create more jobs in the labor force. The deficit is the annual amount the government need to borrow. Write an essay analyzing the advantages and disadvantages of deficit spending and the effects of federal government borrowing on the economy i.e., the “crowding out” effect. Academia.edu is a platform for academics to share research papers. First of all, if the budget surplus is a result of reduced government spending, there is … Cover page with a running head2. 6 comments. 70% Upvoted. Advantages of deficit spending: Money spent by the government on the infrastructure helps in creating employment. Mostly, it helps the federal government to cut on its taxes for the affordability of goods and services. Deficit spending occurs when government spending exceeds government revenue. Generally speaking, deficits occur as a result of the economic downturn of a… Crowding-out Effect 4. Minimum of 700 words for your essay is required. 1. Deficit spending is used as an indicator of the financial health of the government. Advantages and Disadvantages of Deficit Spending Some say you have to spend a dollar to make a dollar, when it’s our government its called deficit spending. The advantages of deficit spending by the government can be seen clearly in two main aspects; which are when there is a recession, and investment. However, if the govt are tempted to solve the budget deficit by increasing the rate of taxes this would further deflate the economy leading to lower growth and more unemployment. DEFICIT SPENDING 3 To begin with, government debt enables governments to address economic recessions. Finally, stabilization policy often requires the government to run a deficit. Your paper should be structured as follows 1. We can look at this from two angles. Write an essay analyzing the advantages and disadvantages of deficit spending Deficit Spending During the Great Recession, like any other economic downturns, as unemployment rises, aggregate income declines causing a major decline in tax collections. Deficit Spending, like any other economic downturns, as unemployment rises, aggregate income declines causing a major decline in tax collections. Rising interest rates can “crowd out” (discourage) fixed private investment spending, canceling out some of the demand stimulus arising from the deficit. DEFICIT SPENDING Advantages and Disadvantages Government face when operating in a Deficit Spending Daniel Abrew American Military University 1 DEFICIT SPENDING Abstract Governments finances are run in such way that it is similar as a business. Economic development largely depends on capital formation. Advantages of deficit spending. One of the advantages of deficit spending is that enhances growth in the economy (Pettinger, 2017). The Advantages of Deficit Spending Upon a Nation When a government's spending exceeds that of the revenue for which they generate, the resulting debt, or deficit, will lead to tough expenditure cuts and decisions which will effect the country as a whole. Deficit Spending and Capital Accumulation Deficit spending couid have asecondary effect on the n-ateofeconomic growth. Complete this essay in a Microsoft Word document, and in APA format. Ans: Some advantages of budget deficit are: Allows the government to carry out large infrastructure and development projects; Allows the country to invest in its military at the time of war or unrest; Deficit spending when done correctly might be a major stimulus to economic growth On the other hand, with the rise in unemployment, spending on safety net programs rise. Write an essay analyzing the advantages and disadvantages of deficit spending and the effects of federal government borrowing on the economy i.e., the “crowding out” effect. The government is able to spend the funds on infrastructure, increase public goods and also generate more employment opportunities for the workforce . The basic source of capital formation is savings. The advantages associated with deficit spending is even though the government may not have the monetary funds at the time, by deficit …show more content… Too large of a debt may force the government to raise funds to cover the debt. 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