Define Revenue Receipts in a government budget. Explain how government budget con be used to bring in price stability in the economy.

Revenue Receipts are the receipts which do not create liabilities nor lead to reduction in assets. Stability in the economy means keeping fluctuations in the general price level within limits. When there is inflation, government can reduce its own expenditure to bring down the price level. When there is deflation, government can increase its own expenditure to fight it. Government can also use taxes and subsidies to influence Personal Disposable Income and bring in economic stability in the country.

Detailed Answer:

Revenue Receipts refer to those receipts which neither create any liability nor cause reduction in the assets of the government. Revenue Receipts are classified under two heads, (i) Tax Revenue, (ii) Non-Tax Revenue.

Government budget can be used to bring in price stability in the economy are:

(i) Government budget is used to prevent business fluctuations and to maintain economic stability.

(ii) During excess demand, the government imposes higher taxes and reduces its expenditure to correct excess demand. This implies that government follows the policy of surplus budget during inflation.

(iii) During deficient demand, the government increases its expenditure and reduces taxes. This implies that the government follows the policy of deficit budget during deflation.

Thus, the government through its budgetary policy tries to achieve price stability in the economy.