Question

Describe possible ways to reduce the government budget deficit.

Answer 1

When we talk about any open economy then budget deficit arises when government spending is more as compared to to tax revenue

Tax revenue generated are generally from income tax corporate tax and from many ways of taxes

so if it becomes huge then it will create trouble for the economy in the long run

So for reducing this some of the steps can be taken by-

• by the government is spending
• Increase in the taxes charges by companies and income tax
• lowering the aggregate demand by contractionary fiscal policy in the economy
• Cut the capital spending