A moderate increase in a budget deficit that leads to a moderate increase in a trade deficit and a moderate appreciation of the exchange rate is not necessarily a cause for concern.
What is Budget Deficit?
- When spending surpasses income—that is when the entire amount of money one spends exceeds the total amount of money one gets in—a budget deficit results.
- Both small and big scales of this are possible. For instance, if a person's total monthly costs exceed his or her monthly household income, the household budget may be in deficit.
- When operating expenses exceed revenue, businesses have budget shortfalls.
- The same fundamental idea still holds true: the corporation is in the red because its total revenue is less than what it owes. This can lead to debt, just like it can on an individual basis.
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