Budget deficit is when a government is spending more that it can raise in revenues over a specific period of time.
There are various strategies of financing government deficits:
a) Borrowing from the domestic and foreign money markets; This happens through issuing of treasury bonds, bills and securities. Many investors believe that governments do not default in payment of debts.
b) Reducing government spending
c) Raising taxes. Always remember that increasing taxation should be taken with care considering that in the past, this has ended the career of many politicians and also excessive taxation can slow down economic growth.
d) Printing money. This should be done carefully or else it will lead to inflation or general increase in prices of goods and services.
e) Increasing economic growth is a strategy to finance budget deficits considering that when the economic is booming, people, firms and government agencies will pay more in taxes.
