Different Types of Government Budget - Diagram ↓
A. Balanced Budget ↓
Balanced budget is a situation, inwards which estimated revenue of the regime during the yr is equal to its anticipated expenditure.
Government's estimated Revenue = Government's proposed Expenditure.
For individuals too families, it is ever advisable to accept a balanced budget.
Most of the classical economists advocated balanced budget, which was based on the policy of 'Live inside means'. According to them, government's revenue should non autumn curt of expenditure. They also favoured balanced budget because they believed that regime should non interfere inwards economical activities too should simply concentrate on the maintenance of internal too external safety too provision of basic economical too social overheads. To laissez passer on this, regime has to accept plenty financial dependent then that its expenditures are equal to revenue.
B. Unbalanced Budget ↓
The budget inwards which income & expenditure are non equal to each other is known every bit Unbalanced Budget.
Unbalanced budget is of ii types :-
- Surplus Budget
- Deficit Budget
1. Surplus Budget
The budget is a surplus budget when the estimated revenues of the yr are greater than anticipated expenditures.
Government expected revenue > Government proposed Expenditure.
Surplus budget shows the financial soundness of the government. When in that place is besides much inflation, the regime tin adopt the policy of surplus budget every bit it volition cut down aggregate demand.
Increase inwards revenue yesteryear levying taxes on people reduces their disposable incomes, which otherwise could accept been pass on consumption or saved too devoted to upper-case alphabetic quality formation. Since regime spending volition hold out less than its income, aggregate demand volition decrease too assist to cut down the toll level.
However, inwards modern times, when governments accept then many social economical & political responsibilities it is nearly impossible to accept a surplus budget.
2. Deficit Budget
Deficit budget is 1 where the estimated regime expenditure is to a greater extent than than expected revenue.
Government's estimated Revenue < Government's proposed Expenditure.
According to Prof. Hugh Dalton, "If over a menstruation of fourth dimension expenditure exceeds revenue, the budget is said to hold out unbalanced".
Such deficit amount is to a greater extent than oftentimes than non covered through world borrowings or withdrawing resources from the accumulated reserve surplus. In a way a deficit budget is a liability of the regime every bit it creates a burden of debt or it reduces the stock of reserves of the government.
In developing countries similar India, where huge resources are needed for the utilization of economical increment & evolution it is non possible to enhance such resources through taxation, deficit budgeting is the entirely option.
In Underdeveloped countries deficit budget is used for financing planned evolution & inwards advanced countries it is used every bit stability tool to command work organisation & economical fluctuations.
At the Point E, budget is balanced. To the left of betoken due east the regime budget is inwards deficit too to the correct of betoken E, the budget is inwards surplus.
When the regime incurs a budget deficit it is financed yesteryear borrowing. The regime borrows from Earth yesteryear issuing regime bonds. This gives ascension to regime debt or world debt.
