How to finance budget deficit  

How to finance budget deficit. WAYS OF FINANCING DEFICIT BUDGET BY GOVERNMENT AND THEIR EFFECTS, The ways of financing budget deficit include the followings: By a country’s Bond: Budget deficits are financial by a country’s bonds. In some countries, it is financed by treasury bills, notes and bonds. This is the government’s way of printing money when more money is pumped into circulation, the supply outweighs the demand.

How to finance budget deficit in any economy

  • Through public loans made by government: This is the second solution for financing the budget deficit. This is done in order to make up for supplementary expenditures not covered by current revenues.animal products

           How to finance budget deficit

Explain the concepts of budget surplus balanced budget and the component of national debt.

Explain How to finance budget deficit

How to finance budget deficit


How to finance deficit budget in any economy

Effects of financing deficit budgets

Increasing level of prices: The level of prices of goods and services tend to be on the increase as a result of excessive amount of money in circulation.

  1. It causes a decrease in the purchasing power of people: Budget deficit do cause a reduction in the real income or purchasing power of people.
  2. It causes inflation: The emergence of inflation is caused by too much money in circulation chasing few goods and services.
  3. It causes depreciation of currency: Too much money in circulation tends to cause depreciation or lower the value of that country’s currency.
  1. It leads to decrease in social and economic life of citizens: The combination of depreciation of currency and inflation generally lead to a decrease in the social and economic life of the people so it’s important for government to learn How to finance budget deficit
  2. It encourages importation of goods: Budget deficit is well known to discourage expert but rather it encourages the importation of goods from other countries.

How to finance deficit budget

  1.  economic tools for nation building
  2. budgeting
  3. population
  4. market concept
  5. money market
  7. how companies raises funds for expansion


Causes of low capital formation in West African countries

The causes of low capital formation in West African countries include:

  1. Existence of a vicious circle of poverty: The existence of low income results in low savings and in turn results in a shortage of capital for investment, which results in low investment. Low investment leads to low, output, and eventually to low income. The low income result again to low savings and the vicious circle continues.
  2. Wasteful expenditure: Many governments in West African countries are involved in wasteful expenditure as they embark on prestigious but productive ventures thereby resulting low capital formation
  3. Inequitable distribution of income:In many West African countries, only individuals are rich while the poor. Even the few rich ones spend their money on prestigious projects which are on-productive and these generally give rise to low capital formation.
  4. Higher propensity to consume: In many West African countries, the propensity to consume by the people is higher than the propensity to save. There is a high taste for imported goods, e.g. cars, television, rice and clothing materials. This high propensity to consume results in low savings and investment.

Low saving: Many working class people in West African do not have the habit of saving and are usually poor. This may be due to their low earnings, which may not be enough for them to spend not to talk of saving. This usually affects negatively capital formation can be solved when the above problems

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