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Effects of long-term deficit.

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Added on  2019-09-26

Effects of long-term deficit.

   Added on 2019-09-26

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Effects of long-term deficitDuring the hardship, economist Maynard Keynes evaluated that the federal government not onlyresponsible for reviving the overall economy of the country but is often the single solution whena recession in the country grows deeply (Li, 2013). Effects of long-term deficit spending arefollowing:Low-interest rate.Lack of investment.Shortfalls in aggregate demandMaynard Keynes concluded that the main problem behind the recession is a lack of investment indifferent business activities despite low rates of interest. When both the consumers and businessare not able to awaken the economy of the country, the only way through which government canexpand the level of investment is spending and borrowing. Spending of government canreactivate the poor economy and attract new investment to grow in the near future. During thepoor economy, the government spends a huge amount in collected tax revenues through deficitspending. On the other hand, economists of the Keynesian conclude that deficit spending isrequired in case of economic downturn (Denes, 2013). Deficit spending by the governmentallows them to fulfill shortfalls in aggregate demand and also allow them to pay deficits duringthe time of economic prosperity. A big deficit helps the government in making easy the short-term economic pain. Various economists consider that high deficits in the budget will minimizethe growth rate of an economy in the future with higher interest payments, taxes, and growingdependency on foreign capital.
Effects of long-term deficit._1

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