Question

Is a policy that would run deficits (surpluses) be best for today’s economy? Explain your answer.

Is a policy that would run deficits (surpluses) be best for today’s economy? Explain your answer.

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Answer #1

Almost all countries are running budget deficits today because there is a problem of unemployment almost in every country and output is below potential level.Budget deficits can help increasing employment and output The government can also undertake a lot of development programmes by running deficits.

Budget deficit also increases aggregate demand.Adequate policies can also help in reducing inequality by targeting specific section of the society,thereby reducing inequality.

Thus,budget deficit is necessary for today's economy.

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