Deficit Spending

When a government's expenditures exceed its revenues, causing or deepening a deficit. This excess spending needs to be financed through borrowing, likely from foreign governments. The increased government spending can help stimulate the economy as more money flows in, but the jump in borrowing can have an adverse effect by raising interest rates.

John Maynard Keynes was an advocate of deficit spending as a fiscal policy tool to help stimulate an economy in recession. During a recession, increased government spending can stimulate business activity, create jobs and spur consumer spending. This creates a multiplier effect in which $1 of government spending helps increase GDP by more than $1. Some complain that the negative effect of deficit spending is that interest rates will increase as the government borrows more. The higher rates make borrowing money more expensive and can stifle growth.


Investment dictionary. . 2012.

Look at other dictionaries:

  • deficit spending — [n] paying out in excess of income debt, debt explosion, deficit financing, in the red, megadebt, negative cash flow, no assets, overspending; concepts 324,330,344 …   New thesaurus

  • Deficit spending — Part of a series on Government Public finance …   Wikipedia

  • deficit spending — When government spending overwhelms government revenue resulting in government borrowing. Bloomberg Financial Dictionary * * * deficit spending deficit spending ➔ spending * * * deficit spending UK US noun [U] ► ECONOMICS a situation in which a… …   Financial and business terms

  • Deficit-Spending — De|fi|cit Spen|ding, De|fi|cit|spen|ding [ dɛfɪsɪtspɛndɪŋ ], das; [s] [engl. deficit spending, aus: deficit = Defizit u. spending = Ausgaben] (Wirtsch.): Erhöhung u. Finanzierung öffentlicher Ausgaben, ohne dass die momentan vorhandenen Finanzen… …   Universal-Lexikon

  • Deficit spending — Unter englisch deficit spending bzw. deutsch Defizitfinanzierung wird die Situation verstanden, dass der Staat sich verschuldet, um durch staatlich vergebene Aufträge verstärkte Nachfrage zu generieren, wodurch insbesondere während Rezessionen… …   Deutsch Wikipedia

  • Deficit Spending — Unter englisch deficit spending bzw. deutsch Defizitfinanzierung wird die Situation verstanden, dass der Staat sich verschuldet, um durch staatlich vergebene Aufträge verstärkte Nachfrage zu generieren, wodurch insbesondere während Rezessionen… …   Deutsch Wikipedia

  • Deficit Spending — 1. Begriff: Überschuss der Ausgaben über die Einnahmen der öffentlichen Haushalte (Haushaltsfehlbetrag), um einen expansiven Effekt im Zustand der Unterbeschäftigung zu erzielen. Der Begriff ist eng mit der Fiscal Policy in der Tradition… …   Lexikon der Economics

  • deficit spending — noun spending money raised by borrowing; used by governments to stimulate their economy • Syn: ↑compensatory spending, ↑pump priming • Hypernyms: ↑spending, ↑disbursement, ↑disbursal, ↑outlay …   Useful english dictionary

  • deficit spending — noun Date: 1938 the spending of public funds raised by borrowing rather than by taxation …   New Collegiate Dictionary

  • deficit spending — the practice of spending funds in excess of income, esp. by a government. [1935 40] * * * …   Universalium

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