Finance
What is A budget deficit?
A budget deficit happens when a government (or person or business) spends more than it earns in a given period. To cover the gap, it usually borrows money. Persistent deficits add up into national debt.
See it, don’t just read it.
Watch a 2-minute lesson with voice + animation that explains a budget deficit.
Key things to understand
- 1It's spending more than income in a period.
- 2The gap is usually covered by borrowing.
- 3It's the opposite of a budget surplus.
- 4Ongoing deficits build up into debt.
Frequently asked questions
- What is a budget deficit?
- When spending exceeds income over a period, with the shortfall typically made up by borrowing.
- What's the difference between a deficit and debt?
- A deficit is the yearly shortfall; debt is the accumulated total of past deficits.
- Are budget deficits always bad?
- Not necessarily — borrowing can fund growth or crises, but large, persistent deficits can become risky.