Budget Deficit
When expenses exceed revenue
Real World Example
A budget deficit occurs when a government spends more money than it collects in revenue, often leading to borrowing to cover the gap. Historically, countries have experienced budget deficits during crises, such as wars or economic downturns, to maintain stability and provide necessary services. In recent times, many countries faced budget deficits during the COVID-19 pandemic as they increased spending to support healthcare and provide economic relief to citizens and businesses. Today, budget deficits matter because they can affect government services, taxes, and the overall economy, influencing interest rates and inflation. For example, if your city government runs a budget deficit, it might have to cut funding for public schools, leading to larger class sizes and fewer resources for students.
