What is a budget deficit?
When the spending exceeds the income, it is called a budgetary deficit. This term is commonly used for governments but can also apply to individuals and businesses.
This means a budgetary deficit occurs when the individual, government, or business budgets have more expenses than the revenue they can earn from their income sources. A budget deficit occurs when a country spends more than it earns through regular operations. To reduce the deficit, the country can either cut down some of its spending, increase its income from various sources, or do both. The opposite of a budget deficit is a budget surplus, which means the country has extra money left after paying for its current expenses. The country can use this money as it wishes. The budget is balanced when the country's income and spending are equal.
Formula of Budget Deficit
A budget deficit occurs when the government spends more than it earns. The formula for calculating the budget deficit is:
Budget Deficit = Government’s Total Expenditures − Government’s Total Income
The government’s total income consists of various sources of revenue, such as corporate taxes, personal taxes, stamp duties, etc. The government’s total expenditures include various categories of spending, such as defense, energy, science, healthcare, social security, etc.
Types of Budget Deficit
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Fiscal deficit
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Revenue deficit
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Primary Deficit