Deficit Spending Unit

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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  1. Why do some analysts argue that trade deficits aren't bad for the economy?

    Understand the reasons why trade deficits, reviled by many economic analysts, are not always a bad thing in the eyes of many ... Read Answer >>
  2. At what level is the current account deficit considered excessive, in terms of percent?

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  3. What is the effect of a fiscal deficit on the economy?

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  4. Who thinks fiscal deficits are a good idea?

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  5. What is the difference between a current account deficit and a trade deficit?

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