Comment Synopsis Depending on the feasibility of these estimates, Budgets are of three types -- balanced budget, surplus budget and deficit budget. ThinkStock Photos Depending on the feasibility of these estimates, budgets are of three types -- balanced budget, surplus budget and deficit budget. A government budget is an annual financial statement which outlines the estimated government expenditure and expected government receipts or revenues for the forthcoming fiscal year. Depending on the feasibility of these estimates, budgets are of three types -- balanced budget, surplus budget and deficit budget.
Though an ideal approach to achieve a balanced economy and maintain fiscal discipline, a balanced budget does not ensure financial stability at times of economic depression or deflation. A surplus budget denotes the financial affluence of a country.
Such a budget can be implemented at times of inflation to reduce aggregate demand. This type of budget is best suited for developing economies, such as India.
Especially helpful at times of recession, a deficit budget helps generate additional demand and boost the rate of economic growth.
Here, the government incurs the excessive expenditure to improve the employment rate. This results in an increase in demand for goods and services which helps in reviving the economy. The government covers this amount through public borrowings by issuing government bonds or by withdrawing from its accumulated reserve surplus.
Enables the government to spend on public welfare. Increases burden on the government by accumulating debts.
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