Chapter 16.3, Problem 1R

To determine

To ascertain the significance of the fiscal year, budget deficit, deficit financing, national debt, budget surplus.

Explanation of Solution

Fiscal year is the federal government’s accounting period which starts on October 1 and ends on September 30. It is determined by the calendar year it ends in.

Budget deficit, Budget deficits reflect an imbalance between government spending and revenue (principally taxes). When the spending of the government is more than it generate in revenue, so there is a deficit. Budget deficits are not inherently an concern, and in certain situations may support the economy.

Deficit financing, The most significant thing about deficit financing is that it can produce economic surplus during the growth process. This is, if gross production exceeds the amount of money supply, the multiplier impact of the deficit financing will be greater. As a consequence it will neutralize the inflationary effect.

National debt, the amount of national debt is one of the most important public policy concerns. When debt is correctly used it can be used to promote a country's growth in long term and prosperity

Budget surplus; A surplus budget signifies a country's financial affluence. Such a budget can be introduced to reduce aggregate demand during periods of inflation.

Economics Concept Introduction

Introduction: The USA Federal government is designed to ensure that the government is efficient and that the rights of people are secured, each branch has its own powers and duties, including collaborating with the other branches.