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CSEET · Economic and Business Environment · Indian Union Budget

A government deliberately plans expenditure to exceed its expected revenue during a prolonged slowdown, hoping to raise aggregate demand and employment. This kind of budget is best described as:

This is a deficit budget, because planned government expenditure is deliberately set higher than expected revenue. Such a budget injects extra demand into the economy and supports employment during a slowdown. A surplus budget, with revenue above spending, would instead be used to curb inflation.

  1. ASurplus budget
  2. BDeficit budgetCorrect
  3. CBalanced budget
  4. DZero-based budget

Explanation

When planned expenditure exceeds estimated revenue, the budget is a deficit budget. It is used in recession to stimulate demand through higher public spending. A surplus budget does the opposite and is suited to inflationary conditions.

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