The chapter says that budget deficits reduce the income of future generations but can boost output an income during a recession. Explain how both of these statements can be true.

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22-07-2022
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The chapter says that budget deficits reduce the income of future generations but can boost output an income during a recession. Explain how both of these statements can be true.

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anshumanaryan799 anshumanaryan799 · Answer 1 · 2022-07-30T14:40:31+02:00

Budget deficits indeed boost output and income during a recession as they increase the aggregate demand in the short run. But at the same time accumulated deficits increase the government debt. The debt is a burden for future generations as the balancing of the government budget is postponed for the future.

Budget deficits Indeed, fiscal deficits increase aggregate demand in the short term, thus boosting output and income during a recession. But at the same time, cumulative deficits increase public debt. Debt becomes a burden for future generations as the national budget balance is postponed to the future.

When governments spend more, more money circulates around the economy, helping the economy grow. Help more people invest or buy. This will help stimulate the economy. So budget deficits are not necessarily a bad thing.

Learn more about budget deficits here: https://brainly.com/question/26010226

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