Mindmap: Government Budget and the Economy | Additional Study Material for Class 12 PDF Download

Ans. A government budget is a financial plan that outlines the estimated revenue and proposed expenditures for a specific period, usually a year. It reflects the government's priorities and policies, indicating how public funds will be allocated to different sectors such as healthcare, education, defense, infrastructure, etc.

Ans. A government budget has a significant impact on the economy. It influences the overall level of government spending, taxation, and borrowing, which in turn affects various sectors and stakeholders. For example, increased government spending can stimulate economic growth, create job opportunities, and boost consumer demand. On the other hand, higher taxes can reduce disposable income and potentially dampen economic activity.

Ans. A government budget deficit occurs when government expenditures exceed its revenue in a given period. This deficit is often financed through borrowing, which can have both positive and negative effects on the economy. While deficit spending can stimulate economic growth by injecting money into the system, excessive deficits can lead to inflation, higher interest rates, and a burden on future generations due to increased debt repayment obligations.

Ans. The government budget plays a crucial role in the allocation of resources to different sectors of the economy. For example, increased spending on infrastructure can stimulate construction and related industries, creating jobs and boosting economic activity. Similarly, higher funding for education and healthcare can enhance human capital and improve overall productivity. On the other hand, cuts in certain sectors can have adverse effects, such as reduced public services or job losses.

Ans. To maintain a balanced budget, the government can take various measures including: 1. Increasing tax revenue: The government can implement policies to enhance tax collection, broaden the tax base, or introduce new taxes to increase its revenue. 2. Reducing unnecessary spending: By identifying and eliminating wasteful expenditures, the government can reduce its overall spending and create room for more essential investments. 3. Encouraging economic growth: A stronger economy generates higher tax revenues, making it easier for the government to balance its budget. Implementing policies that promote economic growth, such as infrastructure development or business-friendly reforms, can help achieve this. 4. Controlling public debt: By managing borrowing levels and ensuring responsible debt management practices, the government can avoid excessive debt accumulation and reduce interest payments, ultimately contributing to a balanced budget. 5. Prioritizing expenditure: The government can allocate resources to sectors that require immediate attention while optimizing spending efficiency. This involves careful evaluation of different sectors' needs and a focus on achieving the maximum impact with limited resources.