Macroeconomics

Assignment

The Effect of Government Budget Deficit over Economy

When government takes in less form other revenues or taxes but expands more, called budget deficit. Being a lively debate over whether the budget deficit of the federal government affect the U.S. interest rates and the economy, and how, the extent and the time scale of this effect. This is due in part to the fact that the federal budget has once again shifted markedly deficient state in which it can be expected that remain. Given that there are also high deficits and rising balance of payments, concerns have been raised about the potential risks resulting from the financial and economic debt of the Federal Government of derivatives and related charges, the growing indebtedness of the United States at the international level, the their dependence on the inflow of capital from the imbalance between domestic and foreign financial markets that could affect the economic activities, wealth and income in the country (Abbotta, 2012).

The relationship between the deficit and the gross domestic product has reached record highs. The budget deficit of federal has reached levels not observed since the 80, partly because of the massive fiscal stimulus aimed at reviving a stagnant economy. The launch of five programs for the reduction of taxes from 2001 to 2004 and the rapid growth of expenditure in the defense sector and others have pushed the budget deficit moreover, stimulate real economic growth. Following a high propensity to import and the economic stagnation of business partners, there has been a substantial increase in imports than exports (Colander, 2010).

With regard to federal budget, increased both the general deficit is the standardized or structural budget deficit. Previous research showed poor relationships between the federal budget deficit as well as interest rates, and now a growing number of work shifts attention to the way in which expectations about the deficit or indebtedness may affect interest rates. The balance of the budget unit has gone from a surplus of 236.4 billion dollars in 2000 to a deficit of 412.3 billion dollars in 2004. The estimates of the Congressional Budget Office on the budget standardized highlight the shift from a surplus of $ 109 billion in 2002 to a deficit of 318 billion in 2005.

Reasons for the U.S Budget Deficits

Washington - U.S. Federal Reserve Chairman Ben Bernanke is afraid of the consequences of the U.S. budget deficit for the country's ...