What are the positive and negative aspects of budget deficits and surpluses?

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What are the positive and negative aspects of budget deficits and surpluses? What policy is best for today’s economy? Explain your answer.

Aug 27th, 2015

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BUDGET DEFICIT

ADVANTAGE- Increased government spending.

NEGATIVE EFFECTS-Inflation, crowding out, increased interest rates,increased borrowing and  higher debt interest payments.

BUDGET SURPLUS

POSITIVE EFFECT-Reduced cost of borrowing

NEGATIVE EFFECT-higher taxes and less spending, lower growth rates,higher household debts, reduced government spending on investment. 

The best policy would be a budget surplus as it creates a secure future for the country with an increased capacity to borrow funds at a reduced cost.

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Aug 27th, 2015

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