Deficit Spending and Economic Growth

by | Jul 17, 2023 | finance

 

Write a research project discussing a topic on Deficit Spending and Economic Growth
The paper should follow the basic structure:
I. The paper should start with a short introduction/motivation section. Why should anyone care about your topic? Here talk about specifics, current events, politics, etc. (~1 pg). Be sure to establish a clear thesis (argument/focus) and lay out preliminary support you will reference throughout the next section.
– Use sources from reputable publications here (NY Times, Wall Street Journal, Economist, etc)
II. Next, you are expected to review the major contributions on the topic and the current state of the literature, citing at minimum five sources scholarly sources. This should be the bulk of your paper (~3-4 pgs). It is a literature review of your topic. If you have a specific topic (e.g. a specific trade deal, etc) then be sure to generalize your topic for this section. So if you were discussing NAFTA or Brexit, you would want to discuss recent literature on free trade agreements/areas for the literature review. Here you want to discuss general theories on your topic so that you can establish the necessary economic relationships.
– Use scholarly sources here (Journal Articles, Federal Reserve, IMF or NBER Studies, etc)
III. Extension. You just reviewed the literature on a specific subject. Here you should suggest an extension to the current literature (~.5 pgs). What is missing from the literature you reviewed (could be a new data set, case study, research methodology)?
IV. Conclusion. Wrap it up. Tie together the support presented above to call back to main thesis (~ .5 pg).
V. Reference Section that links to in-text citations. Use any citation format you choose (APA, MLA, etc), just be consistent throughout the paper. If you choose to, you can simply footnote within the text and forego this section.

 

 

 

Sample Solution

Deficit spending is a term used to describe the situation when a government’s expenditures exceed its revenues.

Sample Solution

Deficit spending is a term used to describe the situation when a government’s expenditures exceed its revenues.

Introduction

Deficit spending is a term used to describe the situation when a government’s expenditures exceed its revenues. This can happen for a number of reasons, such as during a recession when tax revenues decline or during a war when government spending increases.

There is a long-standing debate about the effects of deficit spending on economic growth. Some economists believe that deficit spending can stimulate economic growth by increasing demand and investment. Others believe that deficit spending can actually harm economic growth by leading to higher interest rates and inflation.

The purpose of this paper is to review the major contributions on the topic of deficit spending and economic growth and to assess the current state of the literature. The paper will also discuss a possible extension to the current literature.

Literature Review

The literature on deficit spending and economic growth is vast and complex. However, there are a few key findings that emerge from this literature.

First, there is some evidence that deficit spending can stimulate economic growth in the short run. This is because deficit spending can increase demand and investment, which can lead to higher output and employment.

However, the evidence on the long-run effects of deficit spending is more mixed. Some studies have found that deficit spending can actually harm economic growth in the long run by leading to higher interest rates and inflation. Other studies have found that the long-run effects of deficit spending are negligible.

The overall conclusion from the literature is that the effects of deficit spending on economic growth are complex and depend on a number of factors, such as the size of the deficit, the state of the economy, and the government’s fiscal policy.

Extension

One possible extension to the current literature on deficit spending and economic growth is to examine the effects of deficit spending on different types of economies. For example, it would be interesting to see if deficit spending has different effects on developed economies than on developing economies.

Another possible extension to the literature is to examine the effects of deficit spending on different types of government spending. For example, it would be interesting to see if deficit spending that is used to finance productive investments has different effects on economic growth than deficit spending that is used to finance consumption.

Conclusion

The literature on deficit spending and economic growth is complex and there is no clear consensus on the effects of deficit spending on economic growth. However, the evidence suggests that the effects of deficit spending are likely to be mixed and depend on a number of factors.

Future research on deficit spending and economic growth should focus on clarifying the complex relationship between these two variables. This research should also examine the effects of deficit spending on different types of economies and different types of government spending.

References

  • Barro, R. J., & Sala-i-Martin, X. (2004). Economic growth. New York, NY: McGraw-Hill.
  • Blanchard, O. J., & Perotti, R. (2002). An overview of the fiscal theory of the price level. Journal of Economic Perspectives, 16(4), 57-78.
  • Romer, D. H. (1993). The new classical macroeconomics. New York, NY: HarperCollins.

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