What is a budget deficit?

A budget deficit occurs when a government's expenditures exceed its revenues over a specific period, typically a fiscal year. This situation indicates that the government is spending more money than it is bringing in through taxes and other sources of income. A budget deficit is a crucial concept in macroeconomics because it can affect a country's fiscal policy, economic growth, and the overall health of its economy.

In this context, the first option describes a budget surplus, where savings are greater than expenditures, while the second relates to balancing the budget—where revenues and expenditures are equal. The fourth option refers to government investment in public projects, which does not inherently relate to the concept of a budget deficit, as investment can occur whether or not there is a deficit. Understanding that a budget deficit reflects a situation where spending surpasses income is essential in analyzing governmental fiscal behavior and its implications for the economy.