ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -What is the Difference Between the Federal Budget Deficit and the Federal Government Debt? A federal budget deficit occurs when government spending outpaces revenue or the income drawn from taxes, fees, and investments. Deficits add to the national debt or federal government debt.

Detailed explanation-2: -To pay for a deficit, the federal government borrows money by selling Treasury bonds, bills, and other securities. The national debt is the accumulation of this borrowing along with associated interest owed to the investors who purchased these securities.

Detailed explanation-3: -Unlike the deficit, which drives the amount of money the government borrows in any single year, the debt is the cumulative amount of money the government has borrowed throughout our nation’s history. When the government runs a deficit, the debt increases; when the government runs a surplus, the debt shrinks.

Detailed explanation-4: -What is the difference between the federal budget deficit and the national debt? The budget deficit is the amount by which expenditures exceed revenues in a particular year, while the national debt is the cumulative effect of all past budget deficits and surpluses.

Detailed explanation-5: -How is the national debt affected by the national budget? The debt increases every year that there is a budget deficit. Officials argue that the government needs to reduce the national debt.