A deficit is a state of financial health that affects a large variety of businesses, organizations, and governments. These organizations include a wide specter of professionals that all must monitor their budgets: accountants, business owners, financial professionals, governmental figures, and many more. One of the most famous budget deficits is that of the United States government, but the most common is by ordinary businesses that are mismanaged or poorly executed.
In a nutshell:
- A deficit occurs when expenses exceed revenues, imports exceed exports, or liabilities exceed assets in a particular year.
- Governments and businesses sometimes run deficits deliberately, to stimulate an economy during a recession or to foster future growth.
- The two major types of deficits incurred by nations are budget deficits and trade deficits.