Question

Explain how decreased domestic investments that occur due to a budget deficit will affect future economic growth.

Short answer

Due to the autumn within the investment of capital, the economic process falls. because the investment falls, the new equipments, materials and other stuffs of capital won't be available for the industries to grow.

Step-by-step solution

Concept Introduction  

The budget balanceis the values of government revenue and spending. When spending is higher than earning, the budger is said to be in deficit. When the earning of the government i higher than expenses incurred, budget is said to be in surplus.

Explanation of Solution 

In the case of deficit, the govt mainly borrow from the loanable market. This increases the rate and reduces the demand for investing more. If the deficit continues to persist, then the event of capital will gradually falls which further hinders the economic process within the long run.