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What is a budget deficit?

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Quick answer

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. It's spending more than income in a period.

Key things to understand

  1. It's spending more than income in a period.
  2. The gap is usually covered by borrowing.
  3. It's the opposite of a budget surplus.
  4. Ongoing deficits build up into debt.

People also ask

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.