What does the term 'deficit spending' refer to?

The term 'deficit spending' refers specifically to spending more than the available tax revenue. In this context, it describes a situation where the government expenditures exceed the amount it collects in taxes and other revenues during a specific period. This often leads to the government borrowing money to cover the shortfall, which can be used for various purposes — such as funding public services, infrastructure projects, or stimulating economic growth.

Understanding deficit spending is crucial, as it impacts national debt levels and economic policies. When a government engages in deficit spending, it may be able to stimulate economic activity in the short term; however, if persistent, it can also lead to larger deficits and increased public debt in the long run. This concept is central to public finance and is a key area of consideration in discussions about fiscal policy and economic health.