Budget Deficit

Budget Deficit

Introduction

Budget deficit can easily be defined as the excess government's expenditure over government's revenues from taxes or other sources of earning revenues. In simple words it's the excess of expenditures over revenues. And when this happens government finds a way to meet its expenditures. These ways either can be in the form of increasing taxes of taking loans. Hence increase in budget automatically means increase in government's depts. This put an adverse effect on the economy as the federal government has to pay the interest on loans every year, which mean the money that could have been utilized somewhere else for the betterment of the country is being used to pay the interests without getting any benefits. Moreover it affects the economy when the payment of principle amount is to be made. A positive budget deficit means that the expenditures are less than the revenues (Kopcke et.al, 2006).

Discussion

It is a simple concept that a man is only happy when his earnings are greater than his expenditures and by the end of the month he can save some money which is remained in hand after all the expenditures. But if he does not have enough money to fulfill his basic needs or to finance his expenditures then he will be forced to take loan from the bank or will borrow money from his friends or relatives, this transaction will affect his future income that will be utilized to pay the previous debts. This little concept has a great value even at the broader term as well. A government can control inflation when its expenditures are less than its revenues or even equivalent to its revenues from taxes and other sources of revenues.

But if the expenditures are more than its revenues from the taxes, then the government will ...