Deficit Spending

Deficit spending occurs when a government spends more money than it earns in revenue, typically through taxes. To cover the gap, the government borrows funds, often by issuing bonds. This approach can stimulate the economy during downturns, as it allows for increased investment in public services and infrastructure. However, persistent deficit spending can lead to higher national debt and may result in long-term financial challenges, as the government must eventually pay back borrowed amounts with interest. Balancing spending and revenue is essential for maintaining fiscal health.