Final answer:
Deficit spending is a theory used by the Federal Government to revive the economy by spending more money than it collects in revenues. This stimulates the economy by creating jobs and increasing consumer demand.
Step-by-step explanation:
Deficit spending is a theory used by the Federal Government to revive the economy. It involves the government spending more money than it collects in revenues, which results in a budget deficit. This deficit spending is done to stimulate the economy by increasing government spending on projects and services. The idea is that the additional government spending will create jobs and increase consumer demand, leading to economic growth.
For example, during the Great Depression, the government implemented deficit spending through programs like the Works Progress Administration (WPA) to create jobs and stimulate economic activity. By investing in infrastructure projects and employing workers, the government aimed to boost economic growth and revive the economy.
However, it's important to note that deficit spending can lead to an increase in the national debt, as the government needs to borrow money to finance the deficit. This can have long-term consequences for the economy, including lower economic growth and potential inflation.