The deficit in economy It is the situation that occurs when expenses are much higher than income because of the scarcity of money. It is directly linked to the commercial system of the different states and companies.
This occurs when the balance of a person or company has a negative status, that is, when the income that is have not enough to cover expenses, therefore, the capacity collected is below the charges that are have.
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Mostly this term is frequently used to refer to the accounts of an administration or state that cannot cover the expenses that are produced by public organizations.
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When a government does not have sufficient capacity to minimize debts and does not have the necessary reserves To cover the payments, it could only fix the deficit through loans obtained by the central bank of the country.
In this article you will find:
Types of deficit in the economy
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The deficit is related to the commercial scope of companies and administrations, but it can be classified in the same way as follows:
Budgetary
It refers to the fiscal surplus, which is foreseen by the government when it carries out the budget for the following year.
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Fiscal
It is directly linked to the public administration. It takes place when said administration does not have enough capacity to have the collection of a certain amount of money to meet its expenses. It is also related to the money that one administration receives from another that is in operation.
Primary
It is about the fiscal deficit that does not assume the costs of the previous financing, which means that it does not have the interest on the debts that were obtained before assuming those costs. Therefore, it can be called a surplus or a total deficit.
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Exterior
It is the difference that exists between the income and expenses that a country has related to abroad, any deficit can occur in the accounts of the balance of payments, some of them are:
- Capital deficit: This occurs when more investments are made abroad with national money, than when foreign investments are made within the territory of the country.
- Trade deficit: It occurs when the costs of importing a country are much higher than that of exports.
- Financial deficit: This happens when the citizens of a country send out more money than they receive.
Public
It is the one that carries out the administration in its entirety of a country, associated with national accounting.
Discretionary deficit
It is conditioned by the economic policies that are carried out in the government.
Trend
It is produced by normal and automatic structuring due to the growth of the birth rate and in turn of the population.
Structural
It is very important to try to correct it, as it stems constantly and independently from the influence of the economic period.
Short-term or cyclical deficit
It is a situation that happens temporarily, due to economic periods, therefore, it will not be necessary having to implement measures that relate to cost structure and administrative funding.
Food deficit
It is directly related to the lack of products and food.
Private deficit
It can arise when a company or family does not have enough income capacity to cover their financial expenses due to the exaggeration of debts they have.
Difference between deficit and debt
When you talk about deficit and debt, It is about the relationship that exists between two indicators that may be together, but are different.
If you can not give them in front of the bills of the different administrations and social security and when making expenses higher than what is collected, loans are made to foreign markets, producing what we know as debt.
The main relationship that exists between deficit and debt is that when there is a deficit, no matter how small, the debt rises in level.
This debt now represents the global money that the state has requested as a loan to third parties, this will be the way of being able to finance the markets, since their income is below what they obtained and are not enough.
The deficit can be noted in the state accounts specifically for a year and can be measured if there have been excessive spending on income. This means that if a deficit is zero or positive, it means that no expenses have been made above income.
On the contrary, if the deficit is negative, indicates that overspending has been made. Therefore, expenses must be reduced to avoid excess deficits and thus reduce debt growth.
