A budget deficit occurs when a government's expenditures exceed its revenues over a specific period, typically a fiscal year. This means that the government is spending more money than it is bringing in through taxes and other income sources. To cover this shortfall, the government may borrow money, which can lead to an increase in national debt. Budget deficits can have various implications for the economy. While they can stimulate growth during economic downturns by funding public services and infrastructure, persistent deficits may raise concerns about fiscal sustainability. If deficits continue over time, they can lead to higher interest rates and reduced investment in the economy.