A government's budget balance is the difference in government revenues (primarily from taxes) and spending. If spending is greater than revenue, there is a deficit. If revenue is greater than spending, there is a surplus.A government deficit can be thought of as consisting of two elements, structural and cyclical. At the lowest point in the business cycle, there is a high level of unemployment. This means that tax revenues are low and expenditures are high, leading naturally to a budget deficit.The additional borrowing required at the low point of the cycle is the cyclical deficit. The cyclical deficit will be entirely repaid by a cyclical surplus at the peak of the cycle. This type of deficit serves as an automatic stabilizer.The structural deficit is the deficit that remains across the business cycle because the general level of government spending exceeds prevailing tax levels. Structural deficits are the result of discretionary fiscal policy and can shift theaggregate demand curve to the right.Crowding out is a negative consequence of budget deficits in which higher interest rates lead to less private investment, higher exchange rates, and fewerexports.Crowding out is a negative consequence of budget deficits in which higherinterest rates lead to less private investment, higher exchange rates, and fewer exports.
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The different types of budgetary deficit are explained in following points :-
1. Revenue Deficit
2. Budgetary Deficit
3. Fiscal Deficit
4. Primary Deficit
5. Monetised Deficit