There are a few ways a government can influence the economy. One way is through deficit spending, which involves spending more than the income produced. The other way is through the crowding-out effect, which changes the way the private sector spends its money. If governments are not careful, they can negatively impact the economy and place it under undue stress. which is a form of loan. When a government spends more than it earns, it must borrow money to make up the difference. This borrowing can come from various sources, such as issuing bonds or borrowing from other countries. While deficit spending can stimulate economic growth and provide much-needed funding for important programs, it can also lead to inflation and a decrease in the value of the country's currency. Therefore, it is critical that a government carefully considers the potential consequences before engaging in deficit spending. The biggest benefit of deficit spending is the multiplier effect. This occurs when the government spends money, which enters the private sector of the economy, stimulating businesses to increase production. This, in turn, requires more employees and more people will have jobs, putting their money back into the economy. The multiplier effect is the desired outcome of deficit spending, as it can help revive an economy after a recession (Lee, 2012). Another benefit is that the government doesn't raise taxes, allowing the private sector to spend more on things that stimulate the economy. However, these advantages only last for a short time and tend to work only in the short term, eventually turning into long-term disadvantages for the economy. This effect occurs when government deficit spending begins to raise interest rates, affecting the private sector. sector of the economy. As interest rates rise, individuals and businesses are more likely to save rather than spend their money. This can cause an economy to stop growing and stagnate, which may be the exact opposite outcome the government is trying to achieve (Habib & Miller, 2000). Another way in which government spending can produce the crowding-out effect is through general spending. Social security and welfare programs, especially in developed countries, can cause this effect. One reason is that lack of spending by individuals receiving this type of care typically does not support economic growth (Habib & Miller, 2000).