USA HISTORY

Detailed explanation-1: -If the government spends more than it collects in revenue, then there is a budget deficit. If the government spends less than it collects in revenue, there is a budget surplus. In fiscal year (FY) 2022, the government spent $6.27 trillion, which was more than it collected (revenue), resulting in a deficit.

Detailed explanation-2: -When the government increases spending or cuts taxes, so that it has a budget deficit, the government will have to borrow. That borrowing pushes up interest rates. Higher interest rates reduce spending by consumers and businesses. Reduced spending by consumers and businesses reduces Aggregate Demand.

Detailed explanation-3: -Unless there is an increase in economic activity commensurate with the amount of money that is created, printing money to pay off the debt would make inflation worse. This would be, as the saying goes, “too much money chasing too few goods."