deficit

(noun)

the amount by which spending exceeds revenue

Related Terms

  • operating liquidity

Examples of deficit in the following topics:

  • Financing Balance-of-Payments Deficits and Surpluses

    • Surpluses are easier to finance than the deficits.
    • Some call a "deficit with tears" because a central bank or government must use its resources to finance it.
    • Government or central bank allows the exchange rate to correct any surpluses or deficits.
    • Unfortunately, the trade deficit initially worsens before improving.
    • For instance, a country is experiencing a balance-of-payments deficit.
  • Chapter Questions

    • If a country has a fixed rate regime and experiences a balance-of-payments deficit, please explain how the country must maintain this exchange rate.
    • Many foreign investors are worried over the U.S. government's large trillion-dollar deficits, and the U.S. economy is plagued by massive trade deficits.
  • Does U.S. Treasury Affect the Monetary Base?

    • Government finances budget deficits in three ways.
    • Could the U.S. federal government affect the monetary base by financing budget deficits?
    • Treasury finances a budget deficit by selling T-bills.
    • Treasury finance budget deficits.
    • However, the Fed can finance budget deficits indirectly.
  • Balance of Payments

    • Subsequently, the United States finances this deficit by borrowing from foreigners.
    • Current account deficit is large because the United States imported more goods than exported.
    • If a country has a current account deficit, then a financial surplus finances this deficit.
    • For example, the United States has operated current account deficits for the last 45 years.
    • Thus, the U.S. debt and trade deficits go together, and we discuss them under the Hegemony section in this chapter.
  • Is the Federal Reserve Independent of the U.S. Government?

    • However, a government budget deficit could lead to money creation.
    • If the Fed maintains a constant interest rate, and the U.S. government operates a budget deficit, the U.S.
    • Treasury department can finance the deficit by issuing T-bills.
    • Consequently, a government budget deficit leads to inflation if a central bank focuses on the interest rate.
    • Consequently, a government would suffer from a budget deficit that its treasury can finance by selling government bonds.
  • Answers to Chapter 15 Questions

    • The IMF helps countries finance a balance-of-payments deficit.
    • Balance-of-payments deficit causes a surplus of currency on the international exchange markets.
    • If a country devalues it currency, subsequently, the impact does not immediately reduce a trade deficit.
  • The Exchange Rate Regimes

    • Consequently, a gold standard automatically eliminates trade deficits and surpluses.
    • Moreover, government could print money to finance budget deficits, but this causes inflation.
    • The IMF grants loans to countries that experience balance-of-payment deficits.
    • The IMF helps countries that are experiencing balance-of-payments deficits.
    • For example, Britain has a balance-of-payments deficit, and it borrows from the IMF.
  • Hegemony

    • The U.S. government accumulated a large public debt, and the U.S. economy suffers from sizeable trade deficits, causing an outflow of U.S. dollars into the international markets.
    • For now, these pieces of paper have value, but some question whether the U.S. government can finance the dual deficits over a long time period.
    • A hegemony's trade deficits become a money source for the world's economy.
  • Fixed Exchange Rates

    • Thus, this country could devalue its currency to reduce its balance-of-payments deficit.
    • Unfortunately, the Mexican government could not finance the large trade deficits as it depleted its reserve funds.
  • Answers to Chapter 12 Questions

    • Consequently, the U.S. trade deficit worsens.
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