Government Budget and the Economy
Class 12 Economics · Introductory Macroeconomics · Chapter 5
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اردو (اختیاری)
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संस्कृतम् (केन्द्रिकम्)
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Physics
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हिंदी (ऐच्छिक)
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Physics
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اردو (کور)
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Chemistry
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Urdu Elective
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Computer Science
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Chemistry
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Fine Art · Painting
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हिंदुस्तानी संगीत (गायन / वादन)
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Biotechnology
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Accountancy
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सृजनात्मक लेखन और अनुवाद
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Business Studies
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हिंदुस्तानी संगीत (तबला / पखावज)
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History
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History
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History
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Geography
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Geography
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Geography
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Psychology
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English Core · Flamingo
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Home Science
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Home Science
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Summary
The government budget is the annual financial statement of estimated receipts and expenditures, presented to Parliament under Article 112 of the Constitution. Through the budget the government performs three functions: allocation (providing public goods such as defence and roads, which are non-rival and non-excludable and so cannot be supplied by the market), redistribution (changing the distribution of income through taxes and transfers to make it fairer), and stabilisation (correcting fluctuations in output, employment and prices). The budget has two parts. The revenue budget covers revenue receipts (tax revenue from direct and indirect taxes, and non-tax revenue) and revenue expenditure. The capital budget covers capital receipts (borrowings, recovery of loans, disinvestment) and capital expenditure, which create or reduce assets and liabilities. The chapter defines several deficit measures: the revenue deficit (revenue expenditure minus revenue receipts), the fiscal deficit (total expenditure minus receipts excluding borrowing, which shows the government’s total borrowing requirement), and the primary deficit (fiscal deficit minus interest payments). It also covers fiscal policy and the multipliers — government-expenditure, tax, balanced-budget and transfer multipliers — automatic stabilisers, the issue of government debt and its burden, the Ricardian equivalence idea, the FRBM Act and the GST.
Key terms
Government budget
The annual statement of the government’s estimated receipts and expenditures.
Public goods
Goods that are non-rival and non-excludable, which the market fails to provide and the government supplies.
Revenue deficit
The excess of revenue expenditure over revenue receipts.
Fiscal deficit
Total expenditure minus receipts other than borrowing — the government’s borrowing requirement.
Primary deficit
The fiscal deficit minus net interest payments.
Fiscal policy
The use of government spending and taxation to influence output, employment and prices.
Extra questions & answers
Try one from this chapter
Public goods must be provided by the government because they are: