BUDGET DEFICIT: CAUSES AND CONSEQUENCES

Abstract

State budget is the main component of the financial system. Any country tends to balance the state budget; however, currently, most states have a budget deficit. The problem of the budget deficit became a major concern in macroeconomic policy, especially in the 1980s, when countries around the world frequently experienced budget deficits. This concern is natural, because the prospect of a large budget deficit outlines the prospect of both, a reduction in government spending and an increase in taxes, which would certainly lead to a reduction in economic growth. Currently, the knowledge of the budget deficit and the concern for its continuous decrease are of great significance for the Republic of Moldova, especially since our country is facing difficulties in the economy evolution. This paper aims to analyse the causes of the budget deficit and its consequences on the economy.

Keywords

• budget deficit
• budget revenues
• budget expenditures
• gross domestic product (gdp)
• government debt
• financing sources.