What are the potential macroeconomic problems caused by large deficits and a large national debt? What economic conditions might justify deficit spending and increasing the debt?

National deficits are found in the federal budget, where government spending is more than the government revenue. This makes the government borrow funds for it to cater for the extra government spending.

When the government has a high national debt or national deficit, the employment rate declines. This is because the government will be forced to reduce its spending. Thus, it has to reduce the number of people it pays and stop employing new workers. This leads to an increase in the unemployment rate within the economy.

The second problem with high national debt or national deficit is the decline in the money supply. High national debt and deficit lead to a reduction in government spending because it has to put some funds aside to pay its debts; thus, reducing the money supply, which leads to economic straining.

What economic conditions might justify deficit spending and increasing the debt?

One of the activities that can increase the deficit spending and the national debt is war. War makes a country spend more on the military; this makes the government overspend since it has to provide its defense teams with adequate resources. Hence, it is forced to borrow more; thus, increasing the national debt.

The second activity that can increase the deficit spending and the national debt is a health pandemic. Since health is critical to the people in a nation, the rise of a health pandemic will make the government overspend in the health sector. This overspending makes the government borrow from its creditor to cater for other expenses.