What occurs when expenses exceed revenues?

When expenses exceed revenues, a budget deficit occurs. This situation indicates that an individual, organization, or government is spending more money than it is bringing in through income or revenue sources. A budget deficit can arise for various reasons, such as increased spending on programs, services, or investments without a corresponding increase in income.

Understanding a budget deficit is crucial as it can lead to borrowing or the accumulation of debt to cover the shortfall. Over time, persistent budget deficits can pose financial challenges, as they may affect credit ratings and lead to higher interest rates on borrowed funds.

In contrast, a budget surplus arises when revenues exceed expenses, allowing for greater financial stability and the possibility of saving or investing surplus funds. A budget balance refers to a situation where revenues equal expenses, indicating financial equilibrium. An economic boom refers to a significant increase in economic activity, typically characterized by rising GDP and employment rates, which is unrelated to the balance of a budget.