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Consider the following statements : a. A surplus budget may prove useful during the period of inflation. b. A deficit budget is useful for removing unemployment. c. In India, the Agricultural Ministry is responsible for framing the budget of the Union Government. Which of the statement/s given above is/are incorrect ?

Consider the following statements : a. A surplus budget may prove useful during the period of inflation. b. A deficit budget is useful for removing unemployment. c. In India, the Agricultural Ministry is responsible for framing the budget of the Union Government. Which of the statement/s given above is/are incorrect ? Correct Answer Only c

The correct answer is Only c.

Key Points

  • Surplus budget
    • A surplus budget refers to a budget where estimated total receipts are more than the estimated total expenditure.
    • In case of a surplus budget, the government takes more money from the economy than it injects into it.
    • It results in a fall in aggregate demand and price level in the economy and helps to combat inflationary situations. Hence, statement (a) is correct.
  • Deficit budget
    • A deficit budget is said to have occurred when expenses exceed the revenue and it is a symptom of financial health.
    • The government normally uses this term for its spending instead of entities or individuals.
    • Accrued government deficits form the national debt.
    • It accelerates economic growth.
    • It enables us to undertake welfare activities.
    • A deficit budget helps generate additional demand and boost the rate of economic growth.
    • Here, the government incurs excessive expenditure to improve the employment rate. Hence, statement (b) is correct.

Additional Information

  •  What is a Budget?
    • A budget is an approximation of revenue and expenses over a defined future time frame; it is organised and re-conceptualized on a periodic basis.
    • In India, Finance Ministry is responsible for framing the budget of the Union Government. Hence, statement (c) is incorrect.
    • Budgets can be outlined for a person, a family, a group of people, an entity, a country, a multinational organisation, a government, or just anything else that makes and spends money.
    • At institutions and organisations, budget is an internal mechanism inculcated by the management and is often not required for reporting by external parties.
    • The budget is classified into the following three parts:
      • Balanced budget
      • Surplus budget
      • Deficit budget

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