A deficit budget occurs when expenses exceed revenue and can indicate the financial health of a country. The term is commonly used to refer to government spending rather than businesses or individuals.
Budget deficits affect the national debt, the sum of annual budget deficits, and the cumulative total a country owes to creditors.
Deficit budget is one where the estimated government expenditure is more than expected revenue. Today almost all the countries of the world follow deficit budget instead of surplus or balanced budget.
Deficit Budget solves the problem of recession and depression which occurs mainly due to lack of effective demand. Increase in total expenditure of the government, increases employment and income of the people. As a result, the aggregate demand for consumer goods increases. Increase in total expenditure tends to expand aggregate economic activity in the economy.
The term budget surplus refers to a situation that occurs when income exceeds expenditures. The term is often used to describe a corporation or government's financial state, unlike individuals who have savings instead of budget surpluses. A surplus indicates that a government's finances are being effectively managed. The opposite of a budget surplus is a budget deficit, which commonly occurs when spending exceeds income.