a fiscal deficit is a shortfall that occurs when government spending exceeds government revenues. governments often finance their fiscal deficits by issuing bonds, which they must pay interest on. these interest payments contribute to the federal debt. the government can also print currency to reduce its fiscal deficit. the increase in the money supply causes inflation which causes currency depreciation and reduces the value of the government's debt. other options for reducing the fiscal deficit are raising taxes which is unpopular with ? and cutting spending which is unpopular with the groups that benefit from government spending such as retirees, welfare recipients, ?, government employees and ?. fiscal deficits can occur even during bull markets but are more common in bear markets, as ? less economic activity to generate tax revenue. some economists such as those subscribing to the ? school of economics think that fiscal deficits are a good thing. they believe government spending can stimulate the economy. they think this stimulus is especially helpful during the recession. they ? that if the governments overspending is the result of financing projects that create jobs, create a demand for materials and give workers paychecks that they can spend throughout the economy, fiscal deficits can be beneficial. other economists disagree with the ? argument and believe the government's budget should be balanced and have a surplus. they say that increased government spending simply crowds out spending that would otherwise occur in the private sector. also, if a government's fiscal deficit becomes too large, it may have trouble selling more bonds to finance its debt, as investors will begin to doubt the government's ability to repay what it is borrowed.
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