Sample Essay

Using the production possibilities curves we can assume that  if the deficit has been caused by both the private and public sector then we expect the production probability curve to have moved outwards (to the right) for both investments and future production.This in the long run will lead to increased productivity. In the figure below this is depicted by movement from ppc1 to ppc2. now in case the government was to contain this by the use of fiscal policy measures(increased taxation) then this would lead to reduced investments and a decline in future productivity and the production possibility curve would shift from ppc2 and move inwards (to the left). This shift would depend on the level of increased taxation and the curve would be anywhere to the left of ppc2.

In case the government was to instead consider cutting down on some programs like social benefits or loans to university students then this would course some social net loss as the affected members of the society might end up being more poorer as the increased cost of livelihood could even condemn them to a life below the poverty line. This would not auger well since every government usually pledges to reduce the levels of poverty and enhance access to social services to the unprivileged.

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