Question

What is difference btwn surplus budget and deficit budget

Answer 1

Dear student A surplus budget implies that the revenue generated by the government from tax and non-tax sources is higher than the expenditure incurred by it. This reduces the supply of money prevailing in the economy as people are left with less money to spend due to an increase in revenue generated by government from people. The excess of total budget expenditure over the total budget receipts is deficit budget. In other words, budget deficit implies to a situation where the total budget receipts of the government falls short of the total budget expenditure of the government. That is, Budget Deficit = Total Budget Expenditure – Total Budget Receipts. A fall in money supply leads to a decrease in general price level and hence, a decrease in inflation. The vice-versa of above holds true in case of deficit budget. Regards