Any time people or organizations spend more than they take in, the result is a deficit. The term “fiscal deficit” typically refers to a government with expenditures that exceed revenues and consequently runs a deficit. Governments usually make up the difference by issuing bonds to borrow money and finance the fiscal deficit.
Fiscal Deficit Implications
One effect of fiscal deficits is that they lead to growth in the public debt. The national debt, meaning the amount of money the United States federal government owes, is the accumulated total borrowing to finance fiscal deficits in past years. The pros and cons of fiscal deficits are a subject of debate. One view holds that fiscal deficits are bad policy and a balanced budget is better for the economy in the long run. A contrary view is that fiscal deficits can serve as a means of stimulating the economy. This Keynesian theory, named for economist John Maynard Keynes, argues that government deficit spending during an economic recession speeds economic recovery. During periods of economic growth, this view calls for eliminating fiscal deficits.
What Is a Deficit in Financial Accounting?
As used by accountants, the term “deficit” has a meaning similar to its everyday usage. That is, a firm that is running...
What Is Fiscal Debt?
Fiscal debt, as opposed to ordinary debt, is a phrase normally associated with a government's fiscal balance. Fiscal debt and fiscal deficit...
Fiscal Deficit to GDP Ratio
The U.S. budget deficit focuses new attention on the debt as a percentage of the nation's aggregate economic output, as measured by...
How Does Fiscal Policy Work?
Fiscal policy is defined as government spending and taxation, and plays an important role in economic stabilization. Expansionary fiscal policy, such as...
What Is a Fiscal Week?
A business may change its financial year or week in order to accommodate employees, financial transactions, or other considerations. When deciding to...