Refections

Introduction

In much of the West and especially in our own country, government is today much criticized and denounced. Government can be and perhaps always are bureaucratic, slow moving, inefficient, and irritating.

Team D - Weekly Reflection Week Four

This week I had the opportunity to read about how a budget deficit affects the economy. It is true that there is several ways a budget deficit could affect the economy. Budget deficits happen when the government’s spending exceeds their revenue. There are many consequences of increased taxes that further burden the public. I also understand that there have been several instances when our economy has experienced budget deficits as the events of 9/11. This week we also learned about how debt affects our economy. Debt is not only common within the government, but also a large percentage of the U.S. population is experiencing debt in a recessive economy. Spending and interest debt accrued over time are the cause.

The key point is that one is that for a country as for a person, can use more output than it produces in the short run by financing or borrowing but not over a long-run. The fact is that if you own capital such as bank accounts, bonds, or stocks, interest or dividends are paid for its contribution to output. But if I choose to spend more than what I make I am forced to borrow or at least use my savings to fiancé the difference. For example, if I choose to take a vacation, make a personal investment, or my education this would increase my earning power in the future. Either way, I would have to borrow from someone else to lend, which in turn means that person is producing more than spending and saving the difference so it can be lent to me. Understanding I will have to repay that loan presumably with interest and principle repayments.

For a country, it is basically the same thing. If a nation is running a deficit on its current account by importing more than it exports for example, it is using more...