Government Budget Deficits
Governments have been traditionally spending more what they could earn by way of taxes and sale of economic goods and services produced by them. The resultant deficit (variously known as budget deficit or fiscal deficit) could be financed by mobilization of create more jobs and thereby help the economy generate more income. But the way of financing government expenditure has many other implications, many of these may prove adverse: (i) budget deficit may prove inflationary, especially if the economy fails to generate more output; (ii) a large part of domestic saving may be cornered by the government; adequate saving may not be available for private investment; and (iii) this may put pressures on market rates of interest. Macroecomics has paying more attention to these issues in recent years.
In the globalising world of today, interest rates have come to occupy centre stage. Globalisation implies cut-throat competition. Successful globalisation requires that all the actors work to their best efficiency; none of them would like be competed out because they have to pay high rates of interest. Therefore, how to keep interest rates low is the issue that has attracted the attention of economists.
Balance of Payments
Again, in globalising, increase free market economies, goods, services and capital are flowing across national borders as never before. The cross-border transactions in goods. Services and capital give rise to payments and receipts in foreign exchange. Exchange rates, wherever they are left to be determined by market forces, exert their own influence on international economic relations. Therefore, a proper analysis of balance of payments has been a core issue in macroeconomics.
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