Government spending encompasses all the country’s consumption and investment. It however excludes a country’s transfer payments. Basically, any country’s spending is funded by the taxes or country’s borrowing. Excessive government spending is thus a situation where a country spends more than it invests. When a gap exists between federal government’s spending and how it collects its tax, the country is likely to undergo excessive government spending. A likely consequence of excessive government spending is the debt crisis which may stem from its poor control of amount of tax receipts annually. This thus typifies uncontrolled spending.
Excessive government spending negatively affects the economic growth of a country. It presents a diminishing influence on an economy’s economic growth. This is because it negatively affects production of goods and services. Excessive government spending implies retarded investment on private investment and hence reduced economic productivity. A country then diverts its resources far away from the jobs, investments hence a decline in productivity.
Conversely, hyperinflation is an inflation that is extreme in nature. Basically, its surfacing is based on some factors. Major cause is the existence of discrepancy between given money’s demand and supply. In essence, these disparities results in situations where confidence in a given currency is lost. As was put forward by the Neo-liberalism, it comes into existence due to misplaced confidence in a country’s financial base. These may be caused by excessive supply of paper money. The excess paper money in supply is categorically ordered by fiscal and monetary authorities to be printed to help foot extreme country’s expenditures. Hyperinflation results from a country’s spending far more than its ability to tax, together with unavoidable lack of confidence in its currency. In a nutshell, hyperinflation results from the borrowing of excess money and inability to pay for the expenditures.
References
Causes of Hyperinflation. Retrieved at http://www.economywatch.com/inflation/hyperinflation/causes.html
Hazlitt, H. What spending and deficits do? Retrived at http://www.thefreemanonline.org/featured/what-spending-and-deficits-do/
U.S. Debt Dilemma: Caused by Excessive Spending or Not Enough Revenue? Retrieved at http://www.mygovcost.org/2011/07/27/u-s-debt-dilemma-caused-by-excessive-spending-or-not-enough-revenue/
