Question

Long answer type questions:
Define revenue receipts in a government budget. Explain how government budget can be used to bring in price stability in the economy.

Answer 1

Revenue receipts are those money receipts which do not create any corresponding liabilities or cause any reduction in the assets of the government. Example: tax.

One of the objectives of a government is to maintain the economic stability or price stability. Economic stability can be achieved by correcting the situations of deficient and excess demand in the economy. Inflationary gap or excess demand is corrected by reducing government expenditure and increasing the revenue. Whereas, deflationary gap or deficient gap is corrected by increasing the government expenditure and reducing the revenue.