ECO 372 Week 4 DQ 1

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How does a government budget deficit affect the economy? Identify two periods in recent history in which the United States has run budget deficits. What were the reasons for the deficits during those time periods? Why is savings so vitally important to the economy?

Response :

The government budget deficit affects the economy in two ways. A budget deficit in a short-term situation can benefit the economy because as Colander (2010) states, "In the short-run framework, the view of deficits and surpluses depends on the state of the economy relative to its potential.
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