Government budget deficit, Finance Basics

Assignment Help:

Government Budget Deficit

If the Government spends much more than it gets in from tax revenue, it runs a budget deficit. This deficit should be covered or financed either via printing more or borrowing money. The US Government has in the past utilized the two ways of financing its deficit in a balanced way. The effect in interest rates is where the deficit is financed through borrowing or printing. The Government would borrow in the S.T market that increase the demand of available funds for lending such subsequently pushes the interest rates up.

If the Government prints much more money it will lead to inflation and the interest rate would eventually rise. Hence the larger the Government deficit, and the higher the level of interest rates.


Related Discussions:- Government budget deficit

Determine the component of return, Determine the Component of Return ...

Determine the Component of Return Rate of return from an investment consists of the two: (i) Yield: Interest or dividend received is called yield. (ii) Capital Appreci

Important factors for expectation theory, Important Factors for Expectation...

Important Factors for Expectation Theory The following circumstances are essential for the expectation theory to hold. i) Ideal capital markets exists where there are many

Definition of stock exchange, Definition of Stock Exchange According to...

Definition of Stock Exchange According to Pyle: "Stock Exchange are market places where securities which have been listed thereon, may be bought and sold for either investme

Measuring business performance, Measuring Business Performance Defini...

Measuring Business Performance Definition Financial analysis is a process via that finance identifies the company's financial performances with comparing the entities in

[email protected], 1-Suppose you deposit $ 5 000 in the bank. How much c...

1-Suppose you deposit $ 5 000 in the bank. How much can you raise after 10 years when discount rate is 5% for the first four years and then rises to 7% annually? 2 -A used car co

Methods of analyzing investment, Methods of Analyzing Investment Capit...

Methods of Analyzing Investment Capital Budgeting Methods There are two process of analyzing the viability of such investment as: a) Traditional process Pay

Capital Allocation, Consider the following capital market yielding 1% per y...

Consider the following capital market yielding 1% per year and a mutual fund consisting of 60% stocks and 40% bonds. expected return of stocks 9.75% per year and expected return on

Cum. and ex. - terms used in capital market authority, Cum. And Ex. - Terms...

Cum. And Ex. - Terms Used in Capital Market Authority           These prefixes are written in front of other words as like capital, rights and dividends to qualify them."Cum" i

WACC, #The following is the existing capital structure of Company XYZ Ltd. ...

#The following is the existing capital structure of Company XYZ Ltd. Ordinary shares at Shs.10 par 1,000,000 Retained 800,000 12% preference shares Shs.10 par 400,000 16% loan Shs.

Determination of the coupon rate, The partners are still unhappy about one ...

The partners are still unhappy about one of the features of your analysis, namely your assumption that the coupon rate of the bond is equal to 6% per annum. Their thinking is that

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd