Deficit Spending Term Paper Example | Topics and Well Written Essays - 750 words

Deficit Spending - Term Paper Example Generally deficit spending refers to any kind of expenditure from the government side which exceeds the government earnings or revenues. In various countries the concept of deficit spending is different. The main difference is in the component of deficit spending. Generally government expenditures which are financed by the borrowing from the public categorized under the head of deficit spending in the USA. On the other hand, in countries like India, the concept of deficit spending is different. Here expenditure over the current revenues and non-banks borrowing are included under the head of deficit spending. (Gupta et.al, 2008, p.630) Thoma (2011) in his review has mentioned that â€Å"When the government incurs debt, the important factor to consider is what the government doeswith the money relative to what the private sector would have done with it. If the money wouldhave been used for consumption goods or remained idle in bank accounts, and the government uses it to purchase needed infrastructure instead, then this is better from the perspective of future generations since it enhances the productive capacity that they will inherit.† (Thoma, 2011). Deficit spending can create more jobs, specially the government jobs. It helps in supply of foods, unemployment insurance for the poor, in kind subsidies, medical benefits. (Mulligan, 2012). Spending on infrastructure, road, and transport helps the economy of the country to grow. In these cases the initial expense by the government can yield better result in the future. Like advantage, the deficit spending also has some disadvantages as well. Government spending often discourages the high rate of employment as government subsidy sometime acts negatively in terms of employment. Government spending often hampers the private sector activity. A single unit government subsidy means one less unit investment in the productive sector of the

Behavioural Finance Essay Example | Topics and Well Written Essays - 2000 words

Behavioural Finance - Essay Example In some mathematical conditions, this differential equation can be integrated to solve it as indifference curve through x which is called integrability problem (Newman, 1995). 6) Georgescu-Roegen proved that if we consider two goods where differential equation defining an indifferent element is always integrable, it is essential to consider that indifference is transitive relation that denotes that integral curves are indifferent curves. Georgecu proved that transitivity condition guarantees integrable differential equations in all dimensions. Therefore, integrability conditions are unnecessary. In economic terms, integral curves are meaningless unless Axiom I and II are adopted (Newman, 1995). (8, 9) By following Sauelsons techniques, Herman Wold claimed that demand-function approach is rationally equal to the ordinal preference approach. He asserted that Houthakkers theorem is same as his method of proof. However, an analysis of Wolds proof revealed his implicit assumption that his revealed preference is a transitive relation. Wold proved his point by using certain assumptions of perfect competition; however, it is impossible to do because Wold didnt define indifference (Newman, 1995). (10) Wolds integrability assumptions are obsolete because existence of a convex boundary curve comes from this implicit assumption of the transitivity of preference not from explicit assumptions of integrability. (11) Ville deduced the existence of a utility function through excellent analytic evidence. A reasonable interpretation of his axiom can lead to a relation that brings a complete weak ordering on the commodity space. However, his criterion for consumer as "worse off" is insufficient (Newman, 1995). (12) Integrability problem suddenly appears when commodity space has three goods while transitivity problem arises when three situations are considered. Therefore, it arises even when there is two-goods case. Littles treatment assumes