What’s in This Chapter?

What is the difference between a federal budget deficit and a national debt? This unit defines each concept, and describes the relationship between a country’s deficit and its national debt.

The national debt has been the subject of many controversies in recent years. Due to the influence of John Maynard Keynes, countries became more comfortable running deficits during and after the Great Depression. Keynes recommended for governments to run deficits during recessions, and surpluses during expansions, but most countries’ central governments have run deficits nearly every fiscal year, even during expansions. National debts in many countries have skyrocketed during the past several decades.

Some people are not concerned about debts and deficits; others are. How important is it for a government to limit its national debt?