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Unformatted text preview: Government got money for borders Money went to military roads • + Revenues – Expenditures = Balance o > Surplus o < Shortage / Deficit • Debt – accumulation of amount overspent • Governments Spend o Subsidies + -T > G GDP = C + I + G + X – M Fiscal (public) deficit is OK! Keynesian 3 rd Thing Governments can run budget for deficit. • Budget – how much going to take from people and how much going to spend Financing Deficit – when government spends more than they have One Year: If you have fiscal deficit and you sell bonds Debt Next Year: Sell more bonds Increase Debt 2005 – Bush – “2008 deficit will be reduced by 40%” Reducing the fiscal deficit is unpopular. Two ways to reduce deficit: • Cut taxes • Raise government spending Fiscal deficits are to stimulate the economy He never said deficits are okay always!...
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