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Unbalanced budget - meaning, merits , demerit and types?
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Unbalanced budget - meaning, merits , demerit and types?
Meaning of Unbalanced Budget
An unbalanced budget occurs when a government's expenditures exceed its revenues, leading to a deficit. Conversely, a surplus may arise if revenues surpass expenditures. This financial state indicates a misalignment between income and outgoings, influencing economic policies and fiscal health.
Merits of Unbalanced Budget
Demerits of Unbalanced Budget
Types of Unbalanced Budgets
In conclusion, while an unbalanced budget can stimulate growth and support social programs, it also poses significant risks like increased debt and inflation. Understanding these dynamics is crucial for effective fiscal policy management.
An unbalanced budget occurs when a government's expenditures exceed its revenues, leading to a deficit. Conversely, a surplus may arise if revenues surpass expenditures. This financial state indicates a misalignment between income and outgoings, influencing economic policies and fiscal health.
Merits of Unbalanced Budget
- Stimulates Economic Growth: It allows for increased government spending, which can stimulate demand and promote economic growth during recessions.
- Supports Social Programs: Facilitates funding for essential services such as healthcare, education, and infrastructure, benefiting society as a whole.
- Flexibility in Fiscal Policy: Provides governments with the ability to respond rapidly to economic crises or unexpected events without immediate revenue generation.
Demerits of Unbalanced Budget
- Increased Public Debt: Prolonged deficits can lead to higher national debt, burdening future generations with repayment obligations.
- Inflation Risk: Excessive government spending may lead to inflation, diminishing purchasing power and destabilizing the economy.
- Reduced Investor Confidence: Persistent deficits can deter foreign investment, as investors may perceive economic instability.
Types of Unbalanced Budgets
- Deficit Budget: Occurs when expenditures exceed revenues, necessitating borrowing to cover the gap.
- Surplus Budget: When revenues exceed expenditures, allowing for savings or debt repayment.
- Balanced Budget: In an ideal scenario, revenues equal expenditures, promoting fiscal stability.
In conclusion, while an unbalanced budget can stimulate growth and support social programs, it also poses significant risks like increased debt and inflation. Understanding these dynamics is crucial for effective fiscal policy management.
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Unbalanced budget - meaning, merits , demerit and types?
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Unbalanced budget - meaning, merits , demerit and types? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Unbalanced budget - meaning, merits , demerit and types? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Unbalanced budget - meaning, merits , demerit and types?.
Unbalanced budget - meaning, merits , demerit and types? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Unbalanced budget - meaning, merits , demerit and types? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Unbalanced budget - meaning, merits , demerit and types?.
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