Public Finance in India — Economics STD 12 Commerce / Arts — Question

1. A Surplus Budget is that type of budget in which the estimated revenue is greater than the estimated expenditure.
2. Government raises tax revenue which is more than what is required for meeting the expenditure.
3. Surplus budget would lead to reduction in aggregate demand.
4. It is suitable for families and not favoured for government.
5. The policy of Surplus Budget would lead to unemployment and recession in the economy. ‘

Balanced Budget:

1. Balanced Budget is a type of budget in which the estimated revenue of the government is equal to estimated expenditure of the government.
2. Government raises revenue to such an extent which is just sufficient to meet the expenditure.
3. Balanced budget would not affect the aggregate demand in the economy.
4. It is not possible to introduce a balanced budget under present circumstances.
5. The balanced budget policy is called ‘Sound Finance’ where the government performs only minimum function.