When expenditure exceeds revenue, the budget is said to be in ______.

The correct answer is a deficit.

Key Points

• When spending surpasses income, a deficit budget is said to have occurred, and it is a sign of sound finances.
• This phrase is typically used by the government to refer to its expenditures instead of things or people.
• The national debt is made up of accumulated government deficits.
• In other words, a budgetary deficit is said to have occurred when expenditure exceeds income, either in the personal, governmental, or commercial budgets.

Additional Information

•  Surplus
  • ​An item or resource that has more than is currently being used is said to have a surplus. A surplus can relate to a wide range of things, including money, goods, capital, and profits. A surplus in the context of inventories refers to items that are still on store shelves but have not yet been purchased.
  • A surplus in a fiscal sense happens when income is greater than outlays.
  • Governments may also have a budget surplus if there are any tax revenues left over after all expenditures for government programmes have been paid in full.
• Reserve
  • ​A country's central bank, government treasury, or other monetary body may have holdings of currencies, precious metals, and other highly liquid assets that are used to pay off short-term financial commitments, redeem national currencies, and bank deposits.
  • These assets make it easier to control the nation's money supply and currency, as well as to manage liquidity for transactions on international markets. The balance of payments of a nation includes reserves as an asset.
• Debt
  • ​An obligation to pay money or another agreed-upon value to a third party, the creditor, is known as a debt. Debt differs from an immediate purchase in that payments are deferred or made in instalments.
  • A sovereign state or nation, a local government, a business, or an individual may be liable for the debt. Contractual provisions governing the sum and schedule of principal and interest repayments often apply to commercial debt.