What is a fiscal deficit, and why does it often increase during a crisis?
Answer (1)
A fiscal deficit happens when the government spends more money than it earns through taxes and other sources. During a crisis—like a pandemic or financial crash—the deficit often increases because the government must spend more on aid, healthcare, or economic stimulus while its tax income drops. Businesses may close, workers lose jobs, and consumers spend less, which means the government collects less in taxes. That’s why fiscal deficits grow during hard times. While deficits are not always bad, they must be managed carefully to avoid long-term debt problems.
