Budget deficit

Okay kiddo, imagine you have some pocket money every week to buy things you like such as candy, toys, or books. Now, imagine one week you spent more money than what you originally had, which means you owe money to your parents or anyone who gave you pocket money. This is what we call a budget deficit.

Similarly, when a country spends more money than it receives in revenue (through taxes and other sources of income), it results in a budget deficit. It happens when the government spends more than it earns in a year, leading to a shortfall in funds.

To make up for this shortfall, the government may borrow money from other sources such as banks, other countries, or even the public. While borrowing money can help bridge the gap temporarily, it can also lead to an increase in debt and eventually result in higher interest rates, inflation, and other economic problems.

Therefore, it's important for the government to manage their spending and revenue effectively and avoid these budget deficits to maintain a healthy economy. Just like it's important for you to manage your pocket money wisely and not overspend.