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Budget Deficit and Inflation

Hi,

How is budget deficit related to inflation? Ie. Reducing budget deficit reduces GDP growth.. Why?

Thanks

pedpenny, yes you are right. It depends on whether the government is reducing the deficit (like you said) which leads to less GDP and less inflation, or whether it is increasing the deficit by borrowing and spending, which leads to more GDP and more inflation.

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Got it.

Many thanks to you both!

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