Government Budget and the Economy

Government Budget and Economy

Government budget and economy constitute a significant section for class 12 macroeconomics. It was stated that apart from the private sector, there is government that plays a very important role. An economy with both private sector and government is known as a mixed economy.

There are many ways in which the government influences economic life. In this chapter, we will limit ourselves to the functions that are carried on through the government budget.

Also check: Important questions for government budget and the economy

What is a government budget?

A government budget is an annual financial statement that depicts item-wise approximates of expected revenue and foreseen expenditure during a fiscal year.

The government can bring in economic stability, i.e., control fluctuation in general cost price degree via taxes, subsidies, and expenditure. When there is inflation, the government can reduce its expenditure. When there is deflation, a government can reduce taxes and give subsidies to encourage spending by the people.

Also read: What are the objectives of the government budget?

The mentioned concept explains in detail about government budget and the economy for class 12 macroeconomics. To know more about such interesting concepts, stay tuned to BYJU’S.