What are the Three Types of Budget?
By Balaji
Updated on: February 17th, 2023
The three types of budgets are a surplus budget, a balanced budget, and a deficit budget. The state budget is a financial document including income and expenditure for the year. An income- and expense-based spending plan is referred to as a budget. In other words, it’s an estimation of the amount of money you’ll earn and spend over a specific time frame, like a month or a year.
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Three Types of Budget
Financial stability is facilitated by a budget. A budget makes it simpler to save for major expenses like a car or home by keeping track of spending and sticking to a plan. It also makes it easier to pay bills on time and accumulate an emergency fund. Overall, having a budget helps a person’s financial situation, both now and in the future.
Balanced Budget
In this budget, estimated income and projected expenses are equal. Many economists believe that government spending should not exceed its revenue.
- A balanced budget cannot translate into financial stability automatically in terms of economic depression or deflation due to the absence of any scope for additional spending.
- The government can come to the aid of the people. It can borrow money and spend it on public works to increase employment and the overall demand for goods and services and encourage investment.
Surplus Budget
In this budget, estimated government revenues are higher than estimated government expenditures. It serves to reduce the state’s public debt or increase its savings.
- The extra funds can be used to pay fees, which decreases the interest payable and is suitable for the economy in the long run.
- Most useful in times of inflation to reduce aggregate demand.
Deficit Budget
The estimated government revenue in this budget is below estimated government spending. Either the government’s liabilities or reserves are affected. It is most helpful during periods of deflation.
- It contributes to rising the employment rate.
- It encourages economic expansion by generating more demand.
- Depression and unemployment are reduced by it.
- The main drawback is that it may result in overspending by the government or debt accumulation.
Summary:
What are the Three Types of Budget?
There are three types of budgets namely a surplus budget, a balanced budget, and a deficit budget. A financial document that comprises revenue and expenses over a year is the government budget. The annual statement that comprises the estimation of expenses and revenue is called a budget.
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