4 views
0 votes
0 votes
Are fiscal deficits inflationary?
User Avatar
by
12.8k points

1 Answer

0 votes
0 votes
 
Best Answer
Yes, if fiscal deficits are financed by issuing new currency, inflation will rise. It could be worse if the new currency is used to finance the government's current consumption expenditure. When government spending increases while taxation decreases, there is a government deficit, and aggregate demand rises as a result. Fiscal deficits are thus inflationary in this sense. If new funds are used for infrastructure or other capital projects, the fiscal deficit will not cause inflation. In this case, a high fiscal deficit is accompanied by high demand, resulting in a higher output level and a lower inflationary situation.
User Avatar
by
12.8k points

Related questions

Puja Kumari Asked Dec 15, 2022
8 views
Puja Kumari Asked Dec 15, 2022
by Puja Kumari
12.8k points
1 answer
0 votes
0 votes
8 views
1 answer
0 votes
0 votes
3 views
1 answer
0 votes
0 votes
2 views
1 answer
0 votes
0 votes
8 views
1 answer
1 vote
1 vote
8 views
S. Ruby Asked Mar 7, 2023
8 views
S. Ruby Asked Mar 7, 2023
by S. Ruby
7.8k points
1 answer
1 vote
1 vote
8 views
1 answer
0 votes
0 votes
7 views
S. Ruby Asked Mar 6, 2023
11 views
S. Ruby Asked Mar 6, 2023
by S. Ruby
7.8k points
1 answer
0 votes
0 votes
11 views
1 answer
0 votes
0 votes
9 views
WELCOME TO ANSWER AVENUE, WHERE YOU CAN ASK QUESTIONS AND RECEIVE ANSWERS FROM OTHER MEMBERS OF THE COMMUNITY.

Categories