Respuesta :
The decreased domestic investments that occur due to a budget deficit will affect future economic growth as the decreased investment in capital will reduce future economic growth.
A budget deficit occurs when expenses exceed the revenue in the economy. Due to budget deficit economy faces lot of fluctuations. Thus, by reducing national saving, budget deficits lead to less private investment.
As there is less domestic and private investment, this affects future economic growth. This reduces the size of the economy in the long run, and future standards of living.
Hence, if the budget deficit lasts for one year, there would be a one-time reduction in growth.
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