Over 85 percent of surveyed households in Indonesia have received at least one form of government social assistance from Indonesia's National Economic Recovery (PEN) Program, according to a nationwide survey in Indonesia, published in 2021.

In the pandemic year, the government's fiscal options are understandably quite limited. Revenues are down from a slowdown brought about by social restrictions, while expenditures are up, driven by extensive health and social assistance spending. This inevitably creates a widening budget deficit.

Based on Law No. 2 of 2020 concerning State Finance and Financial System Stability for COVID-19 Handling Efforts, the state budget (APBN) deficit has been allowed to exceed 3 percent of the national gross domestic product (GDP) for three years till 2022.

Question:

Using the loanable fund framework, explain the effect of this budget deficit on the economy.