Definition

1. Noun:
   • Government spending financed by borrowing: "Compensatory spending" refers specifically to government expenditures that are funded through borrowing rather than through taxation or other revenue. The primary purpose is to inject money into the economy to stimulate economic activity, especially during periods of recession or low growth.

Usage

• Noun:
  • The government approved a new round of compensatory spending to combat the economic downturn.
  • Economists debated the long-term effects of compensatory spending on the national debt.

Advanced Usage

• As a fiscal policy tool: The term is often used in discussions of Keynesian economics, where it describes a deliberate government policy to increase aggregate demand.
  • The administration's strategy relied heavily on compensatory spending to create jobs and boost consumer confidence.

Variants and Related Words

• Deficit spending (n): A closely related term often used synonymously, referring to government spending that exceeds revenue, resulting in a budget deficit.
  • Deficit spending is a common form of compensatory fiscal policy.
• Fiscal stimulus (n): A broader term for government policies, including spending and tax cuts, intended to stimulate the economy.
  • The stimulus package included both tax rebates and compensatory spending measures.

Synonyms

• Pump-priming: (Informal) Government investment in a project or sector intended to stimulate the wider economy.
• Debt-financed expenditure: A more technical term describing spending funded by borrowing.

Related Phrases

• Counter-cyclical spending: A phrase describing government spending that increases during economic downturns to compensate for reduced private sector activity, which is the core concept behind compensatory spending.
  • Counter-cyclical spending, such as compensatory spending on infrastructure, aims to stabilize the business cycle.

Noun

1. spending money raised by borrowing; used by governments to stimulate their economy