What it is:
How it works (Example):
Trade deficits (also called current account deficits) occur when a country imports more than it exports.
Why it Matters:
Deficit spending is controversial. The famous economist John Maynard Keynes argued that it stimulated economies by giving governments the money to purchase goods and services and were thus particularly useful for getting countries out of recessions. However, many scholars also argue that governments should not engage in deficit spending regularly because the mountain of debt they create makes for unsustainable economies in the long run.