What it is:
Fiscal deficits occur when a government's expenditures exceed its.
How it works/Example:
A term often refers to situations where expenses exceed revenues, imports exceed exports, or liabilities exceed assets.
The most common deficits are fiscal deficits and trade deficits. Trade deficits (also called current account deficits) occur when a country imports more than it exports.
Why it matters:
Deficits are controversial. Economist John Maynard Keynes argued that fiscal deficits stimulated economies by giving governments the to purchase goods and services and were thus particularly useful for getting countries out of recessions. However, many scholars argue that governments should not incur fiscal or regularly because the mountain of they create makes for unsustainable economies in the long run.