Discretionary deficit

The discretionary deficit, also called the discretionary public deficit, is the component of the public deficit that shows the economic consequences of the fiscal actions of a country’s government.

The discretionary deficit is one of the parts that integrate the structural type deficit together with the trend deficit. That is, it is an important part of what we know as public deficit.

Specifically, the discretionary shows the effect produced by the fiscal policy undertaken by a government or state in particular from an economic point of view, since the appearance of a public deficit reflects the greater presence of spending versus income in that territory. Its construction is based on the principle that a country reaches a potential level of production (also referred to as “full employment”) and that it acts at a standard economic juncture.

The clearest example of the field of study of the discretionary deficit is to analyze whether the increase in public spending on a site harms its economy. If this increase fails to generate an increase in income at the same time and the total deficit level is aggravated then the discretionary variable will have been especially causative.

The opposite situation is the discretionary surplus .

Utility of the discretionary deficit

The fiscal policies that many states undertake when designing the economic control of their territories and inhabitants are reflected in the emergence of deficits or surpluses . In that sense, it is possible to analyze and evaluate whether these fiscal measures are little or very influential in their appearance taking into account other variables that are already responsible for taking into account other components of the public deficit.

For this reason it is often an indicator used to rate the management of a government group or team in normal economic conditions

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