We now turn to the costs of deficit spending. (Although we refer to this as “deficit spending,” the same arguments apply if we analyze the effects of a reduction in the government surplus.) First, we ...We now turn to the costs of deficit spending. (Although we refer to this as “deficit spending,” the same arguments apply if we analyze the effects of a reduction in the government surplus.) First, we need to understand what happens in the financial sector of the economy if the government runs a deficit. In the case of the government sector earlier in the chapter, the balance of these flows is another way of saying that the government must satisfy its budget constraint.
We now turn to the costs of deficit spending. (Although we refer to this as “deficit spending,” the same arguments apply if we analyze the effects of a reduction in the government surplus.) First, we ...We now turn to the costs of deficit spending. (Although we refer to this as “deficit spending,” the same arguments apply if we analyze the effects of a reduction in the government surplus.) First, we need to understand what happens in the financial sector of the economy if the government runs a deficit. In the case of the government sector earlier in the chapter, the balance of these flows is another way of saying that the government must satisfy its budget constraint.