DEFINITION of 'Deficit Spending Unit'

A economic term used to describe how an economy or economic unit within an economy has spent more than it has earned over a period of time. To raise the necessary funds to finance a deficit, the economic unit may sell debt (or equity if the entity is a corporation).

BREAKING DOWN 'Deficit Spending Unit'

During times of economic hardship, governments and municipalities are likely to run deficits to shield the effects of a recession and to spur economic growth. Although it is very unlikely that an economic unit will operate at a surplus all the time, a prolonged deficit will eventually cause long-term hardship for the economy as debt levels become too high.

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