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Unformatted text preview: Which of these views is most reasonable? There is likely a bit of truth in all of them. The best view of the budget deficit comes from understanding the major positions on the issue and creating some sort of compromise between the traditional, Ricardian, and fringe viewpoints. Each time a budget deficit is run, money is added to the national debt. Similarly, each time a budget surplus is run, money can be, but is not necessarily, taken away from the national debt. In this context, the national debt is the total amount of money owed by the government for goods and services delivered but never paid for. Interestingly, deficit spending tends to increase both real GDP and the price level. The desirability of these effects of the budget deficit is mixed in the short run. As with the budget deficit, there are a number of different views regarding the national...
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This note was uploaded on 12/13/2011 for the course ECO 1310 taught by Professor Staff during the Fall '10 term at Texas State.
- Fall '10