Difference Between Surplus and Deficit (With Table)

Every country is finding stability. Either it’s population-wise or economic status. The government works day and night to stabilise the country in case of economic terms. Surplus and Deficit are two terms an economist had heard of. However, these two factors are always noted in a fiscal year yet differ from each other. But these two terms are of great use.

Surplus vs Deficit

The difference between surplus and Deficit is that surplus is the quantity or the number of resources that exceeds the utilised position. In contrast to that, the Deficit is a condition where a required resource like money is less than needed. Hence the expense exceeds revenues.

Surplus as the term means in excess. So in the case of the economy, the surplus is the number of resources or assets that exceeds the occupied place. Also, it’s generally used in the description of the excess assets like goods, profits, amount, and even occurs when there’s disequilibrium between demand and supply.

A deficit is a situation where needed resources are less than the requirement. Like money, it’s a deficit when it doesn’t meet requirements. Also, the expenses exceed the revenues. In the case of budget, the inward flow of the sum of money falls short of the outflow, which can be a result of excess expenditure.

Comparison Table Between Surplus and Deficit

Parameters of ComparisonSurplusDeficit
DefinitionSurplus means something in excess. Here when resources exceed the need.Deficit means the resources that are required are less corresponding to the need.
FlowIn budget surplus, the inward flow doesn’t fall short of outflow.In deficit, it falls short of outflow.
ExpenditureThe government expenditure is high in case of surplus.The government expenditure is low in case of deficit.
TypesSome major example can include economic and budget surplus.Major examples are budget and trade deficits.
Effect on TaxDuring a surplus budget, tax reduction may happen.In deficit, taxes might rise.

What is Surplus?

The government takes the necessary steps to find an equilibrium state. Meaning the country will be in a stable state. Since most of the developing countries aren’t stable either economically wise or population-wise. Such a term like surplus comes into account.

A surplus budget is a type of budget where the government revenue is more than their expenditure, due to which there lies a surplus in the budget. It can point to various host of different items like income, profits, goods, capital, etc. A budget surplus can also appear within the governments when there remains tax revenue after every programme is fully financed till the top.

A Surplus is responsible for a market disequilibrium in the demand and supply portion. The imbalance depicts a picture of the inefficient flow of products across the market. It’s not necessary or desirable. Like a manufacturer who produces goods might manufacture goods in excess leading to losses in the business.

Consumer surplus and producer surplus are to main types of economic surplus. Consumer surplus occurs when the price for an item is less than the highest price a consumer would pay. A producer surplus occurs when goods are sold at a higher price than the lowest price the producer wants to sell.

What is Deficit?

In fiscal terms, a deficit appears when expenses are exceeding revenues, imports exceeding exports, or even liabilities accelerating more than the assets. Or in simple terms, the Deficit is the reverse of surplus. A deficit in a country’s economy can occur when the government or authorities spends more money or huge capital than it’s receiving in a fiscal year.

Not every time the Deficit occurs automatically. Sometimes the government also makes it deliberately stimulate an economy during the recession. Running a deficit will minimise the current surplus or any existing debt loans. For this very reason, people believe that this method is someway unsustainable over a long period of time.

There are two major types of government deficit. The first one is the Budget deficit, and the second one is the Trade deficit. A budget deficit occurs when the government spends money more than the revenue collected in a particular period of time. For example, an agency spends $2 bn overall and collects revenue of $1 bn. So the agency is running short or Deficit of $1 bn.

On the other hand, a Trade deficit exists in trading systems. When the value of a nation’s import exceeds the value of its exports. Like a nation imports $3 bn in items and exports only$2 bn. So the trade deficit is $1 bn.

Main Differences Between Surplus and Deficit

  1. The term surplus means that the revenue generated is more than the expenditure, while the Deficit means that the expenditure is more than the revenue collected.
  2. The types of economic Surplus are consumer surplus and producer surplus, while types of Deficit are a Trade deficit and budget deficit.
  3. In the case of surplus, the government spends more, while in the case of Deficit, the government spends less.
  4. Reduction in taxes is possible in the case of Surplus, while no reduction of taxes rather rises can be observed in Deficit.
  5. In Surplus, the inward flow doesn’t fall short of outflow, while the reverse appears in the case of Deficit.

Conclusion

Surplus and Deficit are two sides of a coin. What is in the hands is how you manage things. A surplus can create more revenue than the expenditure, while a deficit is just the opposite of the surplus. It’s evident that the two terms run the nation and the foreign trading systems.

Surplus, on the one hand, can be implemented deliberately, and so the Deficit. It’s important to realise the need and the implementation of both of the terms to run a safe and secure economy. Economic growth decided the overall race of a country. It changes the state from developing to developed and may be developed to developing.

References

  1. https://books.google.com/books?hl=en&lr=&id=TS98mJVaxqIC&oi=fnd&pg=PR11&dq=surplus&ots=hQj71tQ4gR&sig=OeizRMAp-qSBwnSXCc5s3tQPT5E
  2. https://www.jstor.org/stable/26057943
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