Advantages And Disadvantages Of Deficit Spending

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Deficit spending is when purchases exceed income. It is usually attributed to government spending within an economy. Although it can happen to both individual and business, when government spends more and not able to balance the budget, we say it is deficit spending. Deficit spending is created each fiscal year by congress and government because the spending by government causes the growth of the economy. For example, in the United State deficit spending is mainly caused by social, security, and medical cost. Government spends most of its revenue in each fiscal year into this payment. According to Kimberly Amadeo(2017) he said “ most people don’t realize that wars create more deficit spending than the create recession. The war in Afghanistan cost $28.7 billion in 2001.The war in Iraq for deployed military costs $72.5 billion by 2003. In 2008, the total cost grew to $186.6 billion. Deficit spending in an economy has its own advantages and disadvantages. The advantages of deficit spending are as follows: Firstly, it exerts economic growth. This is because government may have the available funds and therefore spends it on infrastructural development. As infrastructural development occurs, it is in a way creating jobs in the labor force. When that occurs more investors enter into the country to invest thereby creating more jobs leading to an increase in government revenue and high economic growth. When that happens, it is more beneficial to

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