Effects of a Deficit Budget.
- It increases aggregate demand for goods and services which stimulates expansion of firms.
- It stimulates investments which create employment to the people.
- It relieves people of a higher tax burden which enables political support on the side of the masses.
- If the deficit is financed by foreign resources, it may increase the dependency of a country to external resources.
- Deficit budgets tend to be inflationary.
- Deficit budget if financed by external resources may lead to B.O.P problems.
- It is through the budget that the government can provide social services to the public like health services, educational services etc.
- As a social policy the budget may increase worker's wages through the deficit budget as a means of improving peoples' welfare.