The Impacts of Government Borrowing (Economics)

Recall cards on the impacts of government borrowing. How a budget deficit forces an offsetting change through the national saving and investment identity, either lower private investment, higher private saving, or a larger trade deficit, while a budget surplus supplies financial capital. How fiscal policy affects the trade balance through aggregate demand, interest rates, and the exchange rate, and why budget and trade deficits are called twin deficits or, more loosely, cousins. Ricardian equivalence and the partial offset of government borrowing by private saving. How sustained deficits crowd out private investment and slow growth, and how governments can offset this by borrowing for public investment in physical capital, human capital, and research and development.