DEFINITION of 'Austerity'

A state of reduced spending and increased frugality in the financial sector. Austerity measures generally refer to the measures taken by governments to reduce expenditures in an attempt to shrink their growing budget deficits.


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Austerity measures are generally unpopular because they tend to lower the quantity and quality of services and benefits provided by the government. Beginning in 2009, several nations were forced to embark on unprecedented austerity measures. These measures were necessitated by budget deficits that soared to record levels because of actions these countries took to stimulate their economies following the massive credit crisis and global recession of 2008.

  1. Budget Deficit

    A status of financial health in which expenditures exceed revenue. ...
  2. Debt-To-GDP Ratio

    The ratio of a country's national debt to its gross domestic ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects ...
  4. Deficit Spending

    When a government's expenditures exceed its revenues, causing ...
  5. Fiscal Deficit

    When a government's total expenditures exceed the revenue that ...
  6. Sales Tax

    A consumption tax imposed by the government on the sale of goods ...
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  1. What are the main risks to the economy of a country that has implemented a policy ...

    The main risk to the economy of a country that has implemented a policy of austerity is the potential for a self-reinforcing, ... Read Full Answer >>
  2. What austerity measures can a country implement to curtail government spending?

    Broadly speaking, there are three types of austerity measures. The first is focused on revenue generation (higher taxes), ... Read Full Answer >>
  3. Why have austerity policies failed to stabilize Greece's economy?

    Austerity policies are intended to reduce government debt and bring stability to that nation's economy. Austerity's effectiveness ... Read Full Answer >>
  4. What country spends the most on military and defense?

    As of 2013, the United States holds the title for the largest amount of military spending by any country. Despite U.S. military ... Read Full Answer >>
  5. How do you make working capital adjustments in transfer pricing?

    Transfer pricing refers to prices that a multinational company or group charges a second party operating in a different tax ... Read Full Answer >>
  6. Marginal propensity to Consume (MPC) Vs. Save (MPS)

    Historically, because people in the United States have shown a higher propensity to consume, this is likely the more important ... Read Full Answer >>

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