Deficit

A deficit means spending is greater than income or revenue. In simple terms, a deficit happens when more money goes out than comes in. Deficits are important because they often require borrowing to cover the gap. Governments, businesses, and households can all have deficits when their expenses are higher than their income or revenue. For example, if a government collects $1 trillion in revenue but spends $1.2 trillion, it has a deficit of $200 billion. A deficit is not the same as debt. A deficit is the shortfall during a specific period, while debt is the total amount owed over time.