PSBR

The quantity of money a government has to borrow in order to finance its annual expenditure. The PSBR covers the gap between the government's income and expenditure, and is usually financed by the sale of government securities. Keynes argued that a high PSBR should be allowed when economic activity was depressed, enabling public spending when tax receipts are low, in order to encourage growth in the economy. Recent governments have reverted to the neoclassical doctrine that government borrowing fuels inflation and crowds out private investment, and hence the PSBR should be tightly controlled at all stages of the economic cycle.

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