     in economics, austerity describes policies used by governments to reduce budget deficits during adverse economic conditions. these policies may include spending cuts, tax increases, or a mixture of the two. austerity policies may be attempts to demonstrate governments' fiscal discipline to their creditors and credit rating agencies by bringing revenues closer to expenditures; they may also be politically or ideologically driven. in macroeconomics, reducing government deficits generally increases unemployment in the short run.cbo-infographic-the effects of fiscal tightening-august 2012 this increases safety net spending and reduces tax revenues, partially offsetting the austerity measures. government spending contributes to gross domestic product (gdp), so reducing spending may result in a higher debt-to-gdp ratio, a key measure of the debt burden carried by a country and its citizens. higher short-term deficit spending (stimulus) contributes to gdp growth particularly when consumers and businesses are unwilling or unable to spend. this is because crowding out (i.e., rising interest rates as government bids against business for a finite amount of savings, slowing the economy) is less of a factor in a downturn, as there may be a surplus of savings.{{cite news|author=laura d'andrea tyson|url=http://economix.blogs.nytimes.com/2012/06/01/confusion-about-the-deficit/ |title=confusion about the deficit |publisher=new york time
Austerity Fiscal_policy Macroeconomics Public_finance