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How do you calculate a budget deficit?

The formula for calculating the budget deficit is the following: Budget Deficit = Government Spending – Tax Revenues Crowding out and defaulting on debt are possible outcomes of prolonged budget deficits. The government can reduce budget deficits by increasing taxes or by lowering government spending.

What causes a budget deficit?

A budget deficit occurs when government spending exceeds revenue. The federal government's revenue is the income it collects from taxes, fees, and investments. When spending is less than revenue, it creates a budget surplus.

What are the types of budget deficits?

Two of the most common types of government deficits include budget deficits and trade deficits. A budget deficit occurs when a government spends more than it receives, primarily from taxes.


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