[mrraidas]

The simplest explanation of what happens when government uses expansionary fiscal policy is that government deficit increase/surplus decrease. What I am interested is: is it possible that a stimulating effect of an expansionary fiscal policy will, after some time, pay off by an increase in collected government revenues and thus the government will be able to reduce the deficit it made by increased spending?

Short example:

A government runs a budget deficit, by borrowing more it increases the deficit and runs an expansionary fiscal policy. After some time, because of the stimulating effect, collected government revenues increase and in the long run the increased revenues outset the increased spending so the government is able to actually reduce its deficit. Is this possible?

Thank you for the answers.

[paraclete]

Long term deficit funding is undesirable as the debt burden takes over and servicing that debt becomes difficult. Eg; Greece.

The theorm you advance is classic socialist planning, but in order to return revenue to the government in the form of tax, the stimulus must create real growth. Far better to facilitate business investment than to waste public money