Budget deficit - I - Stock Image

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Description
A budget deficit occurs when an entity spends more money than it takes in. Debt is essentially an accumulated flow of deficits. In other words, a deficit is a flow and debt is a stock. An accumulated deficit over several years (or centuries) is referred to as the government debt. Government debt is usually financed by borrowing, although if a government's debt is denominated in its own currency it can print new currency to pay debts. Monetizing debts, however, can cause rapid inflation if done on a large scale. Governments can also sell assets to pay off debt. Most governments finance their debts by issuing long-term government bonds or shorter term notes and bills.

According to Keynesian economic theories, running a fiscal deficit and increasing government debt can stimulate economic activity when a country's output (GDP) is below its potential output. When an economy is running near or at its potential level of output, fiscal deficits can cause inflation.

Image is captured in 12 bit RAW and processed in Adobe RGB color space. [file:111; Lot:34]

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