The central bank of the economy takes its part for issuing such government debts by debt selling in the bond market and in the debt market. Generally the financial institutions of the economy buy such government bonds but the individual citizens of the nation are also allowed to buy the bonds and the national savings certificates. However, when the government caries forward a budget deficit plan regarding its public expanses for a very long time period, the total amount of deficit then called as government debt. In this situation some part of spending of the government used for reimbursement of such debts. (Budget Deficit, n.d.).
A deficit financing through public borrowing generally leads to increase in aggregate demand in the economy and therefore stimulate the economic activities so as to increase the growth and level of employment in the economy. At the end of the Second World War Britain got relief from the huge deficits of the war. Government expenditure was mobilized to the other sectors of the economy. But with the rise of military expenditure in 1950 in Korea, the UK government had to take a deficit budgetary policy that led the amount of deficit to reach to almost 4 percent of GDP in 1953. With the entering in the period of cold war Britain took the policy of fiscal activism between 1950 and 1960. The amount of deficit fluctuated from 2 to 3 percent of GDP in almost every year up to 1967 when the deficit rouse again to 4 percent of the GDP. The government immediately took fiscal tightening measurements that ultimately resulted in surplus in 1969 and 1970. However, fluctuation inn deficit became very apparent after 1970 and in 1973 the deficit again came back to 4 percent of GDP. The situation further eroded when the deficit touched almost 7.3 percent in 1975 with the significant effect of the post war recession. This situation insisted the