5.2.2—Budget deficit and surplus

A budget deficit occurs when government expenditure exceeds revenue during a period. A budget surplus occurs when revenue exceeds expenditure; a balanced budget has equal flows.

The sign describes the current period’s balance, not the accumulated debt. A deficit may be deliberate fiscal stimulus or the result of weak tax receipts and higher welfare payments during a downturn.

Revenue of 700 and spending of 760 give a deficit of 60. If next year’s revenue is 780 and spending 750, that year has a surplus, but the earlier debt need not disappear.

A surplus does not automatically mean debt fell: interest, refinancing and asset transactions also affect the debt stock.