Final answer:
When governments run budget deficits, they bridge the gap by borrowing through the sale of Treasury bonds, notes, and bills. This borrowing increases the national debt.
Step-by-step explanation:
When a government spends more than it collects in taxes, it runs a budget deficit. To make up the differences between tax revenue and spending, the government borrows funds by selling Treasury bonds, notes, and bills. This borrowing can lead to an increase in the national debt, which is the total amount of money that the country owes to its creditors. In cases where the government runs a deficit, the overall debt increases unless the government can run a surplus in the future to offset this borrowing. For example, if a government starts with a total debt of $3.5 billion and runs deficits in year one and two, but then has a surplus in year three, the debt at the end of year three will be the cumulative total of the deficits minus the surplus.