ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -What Is a Deficit? In financial terms, a deficit occurs when expenses exceed revenues, imports exceed exports, or liabilities exceed assets. A deficit is synonymous with a shortfall or loss and is the opposite of a surplus.

Detailed explanation-2: -Deficit spending occurs when government spending exceeds its revenue. Deficit spending often refers to intentional excess spending meant to stimulate the economy. British economist John Maynard Keynes is the most well-known proponent of deficit spending as a form of economic stimulus.

Detailed explanation-3: -Keynes recognized that his deficit spending solution to boost “effective demand” could explode the national debt and cause inflation in the future. But he thought the government could address these problems by increasing taxes once prosperity returned.

Detailed explanation-4: -A deficit spending unit describes how an economy or economic unit within an economy has spent more than it has earned over a given measurement period. The opposite of a deficit spending unit is a surplus spending unit, which leaves money for the company to redistribute.