Types of budgets

A budget takes any of the following forms:

1. Deficit budget
If the proposed expenditure is greater than the planned revenue from taxation and miscellaneous receipts, this is a budget deficit. The excess of expenditure over revenue will be met through borrowing both internally through the sale of Treasury Bills and externally from other organizations.

2. Balanced budget
If the proposed expenditure is equal to the planned revenue from taxation and other miscellaneous receipts this is a balanced budget. Usually, balanced budgets are not presented for unless the expenditure is very limited it would mean the government would have to over-tax the population which can create disincentives. It is to avoid this that the tax revenue is supplemented borrowing.

3. Surplus budgets

If the proposed expenditure is less than the planned revenue from taxation and other miscellaneous receipts, this is a surplus budget. Usually, surplus budgets are not presented for they are deflationary and can create unemployment as the government takes out of the economy more than its put back.



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