Different Types of Government Budget - Diagram ↓
A. Balanced Budget ↓
Balanced budget is a situation, inward which estimated revenue of the authorities during the twelvemonth is equal to its anticipated expenditure.
Government's estimated Revenue = Government's proposed Expenditure.
For individuals together with families, it is ever advisable to convey 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 brusk of expenditure. They also favoured balanced budget because they believed that authorities should non interfere inward economical activities together with should only concentrate on the maintenance of internal together with external safety together with provision of basic economical together with social overheads. To hit this, authorities has to convey plenty financial bailiwick together with therefore that its expenditures are equal to revenue.
B. Unbalanced Budget ↓
The budget inward which income & expenditure are non equal to each other is known every bit Unbalanced Budget.
Unbalanced budget is of 2 types :-
- Surplus Budget
- Deficit Budget
1. Surplus Budget
The budget is a surplus budget when the estimated revenues of the twelvemonth are greater than anticipated expenditures.
Government expected revenue > Government proposed Expenditure.
Surplus budget shows the financial soundness of the government. When at that spot is also much inflation, the authorities tin adopt the policy of surplus budget every bit it volition trim down aggregate demand.
Increase inward revenue past times levying taxes on people reduces their disposable incomes, which otherwise could convey been pass on consumption or saved together with devoted to working capital missive of the alphabet formation. Since authorities spending volition last less than its income, aggregate demand volition decrease together with assist to trim down the cost level.
However, inward modern times, when governments convey together with therefore many social economical & political responsibilities it is almost impossible to convey a surplus budget.
2. Deficit Budget
Deficit budget is 1 where the estimated authorities 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 last unbalanced".
Such deficit amount is mostly covered through world borrowings or withdrawing resources from the accumulated reserve surplus. In a way a deficit budget is a liability of the authorities every bit it creates a blogspot.com//search?q=burden-of-internal-and-external-public">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 operate of economical increment & evolution it is non possible to heighten such resources through taxation, deficit budgeting is the entirely option.
In Underdeveloped countries deficit budget is used for financing planned evolution & inward advanced countries it is used every bit stability tool to command trouble organization & economical fluctuations.
At the Point E, budget is balanced. To the left of quest east the authorities budget is inward deficit together with to the correct of quest E, the budget is inward surplus.
When the authorities incurs a budget deficit it is financed past times borrowing. The authorities borrows from Earth past times issuing authorities bonds. This gives ascent to authorities debt or world debt.
