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Introduction to Business Discussion

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During the Great Recession, the U.S. government increased spending in an attempt to buoy the
economy. Since, at the time, economic growth was stagnantand even declining in some
quartersthere was not enough government revenue generated to keep pace with spending.
Consequently, the government engaged in “deficit spending.” What are fiscal deficits? What are
the consequences of deficits?
“When the federal government spends more than it receives in taxes and other revenues in any
given year, it has a budget deficit, commonly referred to as a fiscal deficit” (Stiglitz &
Rosengard, 2015). Since the 1970s “the United States Government has had higher expenditures
than revenues for all but four years with recent years each showing a fiscal deficit in the US of
more than $1 trillion” (Ross, 2021). Since the 70s there have been policies implemented by the
government to try and help the economy. One of these being the raising of taxes. “Although tax
hikes are common practice, most nations face large and growing debts. It is likely that the higher
debt levels are largely due to the failure to cut spending. When cash flows increase and spending
continues to rise, the increased revenues make little difference to the overall debt level” (Smith,
2021). If the government cannot reduce deficit spending and balance the economy, it can lead to
more debt and the economy never recovering. This would lead to a large recession, such as what
we saw during the Great Depression.
Ross, S. (2021). Understanding the Effects of Fiscal Deficits on an Economy. Investopedia.
Retrieved https://www.investopedia.com/ask/answers/021015/what-effect-fiscal-deficit-
economy.asp
Smith, L. (2021). How Governments Reduce National Debt. Investopedia. Retrieved
https://www.investopedia.com/articles/economics/11/successful-ways-government-reduces-
debt.asp
Stiglitz, J & Rosengard, J. (2015). Economics of the Public Sector. 4
th
Edition. Retrieved
https://digital.wwnorton.com/2831/r/goto/cfi/8!/4

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During the Great Recession, the U.S. government increased spending in an attempt to buoy the economy. Since, at the time, economic growth was stagnant—and even declining in some quarters—there was not enough government revenue generated to keep pace with spending. Consequently, the government en ...
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