Question

Discuss and define the following items, including their pros and cons: • The “Appropriation” versus “Budget” approach to public budgeting. • Discuss and define what a “balanced budget” is. Debate the merits of a balanced budget. Note- Students will be expected to find and review a current article from websites or other media sources regarding a budget issue in local, state, or federal government. Posts should be more than a “book report”, and display proof of critical thinking.

Answer 1

Answer :- Balanced Budget is that budget in which government receipts are equal to government expenditure.

Balanced budget :- Government Receipts = Government Expenditure.

Merits of a balanced budget :-

(i). The government does not indulge in wasteful expenditure.

(ii). A balanced budget ensures the financial stability in an economy.

A balanced buget has an expansionary effect on an economy. An increase in income (or aggregate demand) under balanced budget is equivalent to the amount of government expenditure (or tax revenue). Thus, the multiplier effect of a balanced budget is one (unity). Balanced budget is expected to increase aggregate demand (AD). Accordingly, Balanced buget is a good policy to bring the economy which is at under employement to a full employment equilibrium.

Note :- Balanced budget does not leave aggregate demand (AD) unaffected. AD is expected to rise. It is recommended when the economy is close to the situation of full employment.