Introduction
The budget of any government is entitled to a deficit, surplus and debts. It is almost impossible to find any country in the world running its economy without any these three aspects. A debt is the sum of all deficit that the country has incurred in the past less money repaid, the resultant is the debt of the country. Where a government runs in deficit, the money is credited and debts accumulate. In case of surplus, the extra money is paid to minimize debts. This economic cycle affects institutions and citizens of U.S directly through taxation.
There are certain economic conditions that affect Italian Clothing Company importing goods to the country. Effect of the currency between the US dollar and Italian dollar can be positive or negative. A stronger USD attracts more consumers of the goods, while surplus funds leads to high consumption of the products. The contrary happens if the Italian dollar is stronger and there is deficit which yields to unemployment and less disposable income.
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"The International Financial Reputation of the United States".
Budget Deficits
Federal budget deficit has adverse effect to the people and institutions. They tend to augment an increase in rates and overcrowds other financial institutions. This slows the growth of the economy of America. When that occurs, employment rates decline and there is economy influxes which affect other employment institutions. Mark you, with increased influxes and inflation, high expenses must be incurred to be at per with the current situation.
Budget Surpluses
A budget surplus occurs when the government spends less than the revenue collected. These surpluses have been advantageous to the economy of America. Where the country has surplus, the citizen’s tax is reduced (tax cut). Moreover, the government multiples the income transfers, for example prescription drug benefit to health care. The country also pays its debts and invest some in its infrastructures. The overall effect trickles down to citizens and institutions.
National Debt
Despite the enormous debt that America has, it is manageable. However, it is the reason for the higher taxes in the country. This has negatively influenced investor’s goodwill. There is fear that the debt might grow faster than the GDP. It is estimated that almost 75 percent of the debt is held by the U.S households, federal/ state government and agencies. The burden to pay this debt rests heavily on the taxpayer.
