What are the three types of budget?

By Ritesh|Updated : September 4th, 2022

The three types of budget 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.

Three Types of Budget

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

  • In this budget, estimated government revenue is less than government expenditure.
  • It increases the government's liability or reduces its reserves.
  • Mostly useful in times of deflation.
  • It helps increase the employment rate.
  • It helps create additional demand and promotes economic growth.
  • It helps remove depression and unemployment.
  • The main disadvantage is that it can lead to excessive government spending or debt accumulation.

Summary:

What are the three types of budget?

There are three types of budget: 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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