Question

Define revenue receipts in a government budget. Explain how government budget can be used to bring price stability in the economy.

Answer 1

Revenue Receipts are those receipts of the government which neither creates any liability nor it creates any reduction in the assets of the government. These comprises of tax and non-tax receipts, duties and fines, interest and dividends receipts on government investments and assets.

The government handles business fluctuations through its various fiscal measures and maintains price stability. Government can bring in economic stability, i.e. control fluctuation in general price level, through taxes, subsidies and expenditure. When there is inflation, government can reduce its own expenditure. When there is deflation, government can reduce taxes and give subsidies to encourage spending by the people.