Governments need to keep track of their spending just like we all do. If they spend more than they earn, just like our bank balance goes into the red, so does theirs! This is commonly referred to as a budget deficit: where government spending is greater than government revenue.

A new record was set in the US last month, where the budget deficit for June came in at $864 billion, the highest deficit for a month ever recorded in US economic history. With a previous record set in April this year of $738 billion, the US economy is well on their way to setting a new record for the largest ever annual deficit by the end of 2020.

Fiscal policy, where governments spend money in their economies to combat economic difficulties, has been the favoured tool in the US since the beginning of the Covid-19 crisis. It comes as no surprise then that the current balance sheet is so unbalanced.

Since the end of march, when the US government passed a bill to provide over $3 trillion in economic relief, emergency funding has been filtering throughout the US economy in an attempt to keep the economy afloat.

In addition to the huge levels of spending, government tax revenue has also taken a hit as unemployment rates soar, sales have plummeted, and many businesses have been forced to close down.

THINK LIKE AN ECONOMIST!

Q1. What is meant by the term budget deficit?

Q2. Explain what the increased government spending is likely to have been spent on.

Q3. Analyse the reasons why government revenue has also decreased during the Covid-19 economic crisis.

Click here for the source article

TheCuriousEconomist

Recent Posts

China’s Economy Grows 5.4% — But Can It Withstand Trump’s Tariff Tsunami?

China’s economy started 2025 with stronger-than-expected momentum, growing by 5.4% in Q1—comfortably above forecasts of…

2 days ago

U.K. Government Seizes Control of British Steel Plant

It’s a dramatic move—but one the U.K. government believes is essential for national economic security.…

1 week ago

U.S. Tariffs on China Surge Past 100% as Trump Escalates Trade War – but why?

A new chapter in the U.S.-China trade war is unfolding—and it’s one that economists fear…

2 weeks ago

Can Defense and Housing Turn the Tide on Sluggish GDP Growth in the UK?

The U.K. economy is still stuck in low gear. The Office for Budget Responsibility (OBR)…

4 weeks ago

PepsiCo Plans $1.95 Billion Poppi Acquisition

PepsiCo is planning to acquire prebiotic soda brand Poppi for $1.95 billion, marking a major…

1 month ago

South Africa Unveils $54.5 Billion Infrastructure Plan to Boost Growth

South Africa has announced a three-year, 1 trillion rand ($54.5 billion) public infrastructure plan aimed…

1 month ago