hi there holly shields here for cal kind media what is a budget deficit let's break
it down but first please sub to our channel and press the bell icon to stay ahead of the game
a budget deficit arises when expenditure exceeds revenues usually over a single fiscal year
increasing the national debt budget deficits are typically associated with organizations
governments corporations and people a country may need to boost revenue generating activities
to close a budget deficit while cutting back on specific expenditures or a mix of the two
there could be a variety of factors that cause expenditures to xc revenue like an unavoidable
job loss which can result in a loss of revenue bills for unexpected medical expenses which can
quickly spiral out of control if the debt repercussions aren't too severe and individuals
in the early phases of credit card debt spending can quickly exceed revenue or the data continues
to charge and makes the minimum payment governments lose income during recessions
when workers lose their employment and become unemployed they pay less in taxes this means the
government receives less revenue budget deficits may arise due to unexpected actions and events
such as increased defense spending following the 11th of september 2001 terrorist attacks while the
initial battle in afghanistan cost an estimated 22.8 billion dollars the cost of war in iraq
in the fiscal year 2003 was 51 billion dollars so how about the consequences of a budget deficit
well most businesses with long-term deficits may experience immediate consequences a
person or family has a budget deficit their creditors will contact them as debts go unpaid
their credit score soars making new credit more costly or impossible to get
as a result they may be forced to file for bankruptcy bond ratings decline for companies
with chronic budget deficits when this happens they must pay higher interest rates to obtain
any loans referred to as junk bonds governments rely on taxes for revenue by delivering services
government leaders maintain popular support they'll spend as much as possible if they want
to keep their power the majority of voters are unconcerned about the debts consequences
so what are the types of budget deficits let's break it down there's fiscal deficit
which is the amount of money the government will need to borrow to cover its expenses the
more significant the budgetary imbalance the more money it will be borrowed in the absence of cash
the fiscal deficit helps to understand the government's shortage while paying for expenses
a large fiscal deficit causes the government to spend money it doesn't have
thereby putting the economy under inflationary pressure on the other hand borrowing more money
will hamper future economic growth because most of the funds will be used to pay off debt
plus reduced bonus subsidies and leave encashments lowered public expenditure divestment of public
sector units and increased tax revenue will all help to cover the lower fiscal imbalance
then there's revenue deficit the term revenue deficit refers to a situation in which the
government's revenue is insufficient to cover the costs of essential government services
to cover the revenue deficit the government must liquidate some assets contributing to inflation in
the market a considerable amount of borrowing increases the country's financial debt burden
decreased needless spending increased tax rates and the imposition of additional taxes
when possible could be some of the steps taken by the government to reduce the deficit and finally
primary deficit which refers to the expenditure that government borrowings
will cover while omitting the payment of income interest a zero deficit indicates
that credit or borrowing is required to pay off the outstanding interest payments
because the primary deficit is any borrowings above the existing debt or borrowings
measures to reduce the primary deficit can be comparable to those made to lower the
fiscal deficit like a reduced bonus subsidies and leave encashments or lowered public expenditure
so how is a budget shortfall dealt with well there are only two methods to keep a budget deficit
under control either raise revenue or reduce spending on a personal level getting a raise
obtaining a better job or working two jobs will enhance revenue starting a business or renting out
a real estate are two ways to boost revenue many experts advise avoiding costly and non-essentials
like television subscriptions and starbucks coffees it can also benefit someone with
a spending problem if they seek help social insurance taxes corporate taxes consumption taxes
and income taxes provide the majority of revenue for national governments these tax
increases are the way for governments to increase revenue well if you like this info
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