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Budget Deficit

Budget Deficit

A Budget Deficit is a situation where the expenditure of a state’s budget exceeds that of its income. The reasons for a budget deficit can vary from cost reduction to redirect cash flows for the development of a certain segment, to there being an ineffective financial system and fiscal policy of a state. The main worry for states with a budget deficit is inflation leading to negative consequences for the said state’s economy. Although it also can have some positive consequences as it can stimulate demand and thus stimulate economic growth.

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