Note 11-- Budget deficit

As the name indicates,budget deficit is about the balance between the taxation and government spending which resulting from the greater government spending exceeding the tax revenue.So let's think about the causes:1)Unemployment: With high unemployment,few people will go to jobs and pay their income tax,then tax revenue will go down. Conversely,government has to pay more for the welfare benefits,such as the Job Seeker Allowance.2)Interest rate: When interest rate is high,people will save more and consume less with less tax revenue. Besides,people who borrow money will be reduced which will cause the sructural unemployment and government also has to spend more on the transfers.3)Inflation? I firstly thought that if inflation is high,people will reduce their consumption because of the less value of their money and the taxation revenue will be decreased.But if the inflation is high which means an increasing demand,people will invest more and employ more with greater tax revenue. So is inflation caused by an increasing demand but causing an decreasing demand afterwards?? So is there something wrong with Philibs Curve??
If the budgt deficit is continuing,government will not have enough money to finance its' current activities,transfer benefits and capital investment. Therefore,they have to increase the tax rate
which may put pressure on the consumption by householders and reduce investment. Besides,government has to pay high debts instead of other opportunity costs like spending on the health. But on the other hand,it can mean more government spending on capital investment which can increase employment and stimulate the demand.
p.s. Remeber some information about UK like it is experiencing budget deficit about 3% in 2006.