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Budget is not harmful before the level of full employment. With the increase in public expenditure, output and employment also rise. Due to bottlenecks in production, there may be slow rise in prices which Keynes calls semi-inflation. Semi-inflation is not that harmful for the economy. Arguments against Deficit Budget If not controlled properly, deficit budget creates inflation which creates serious dislocation in production and distribution.
Continuous deficit budget has adverse effect on foreign trade. Exports decline and the exchange value of the home currency falls. Deficit budget and deficit financing are closely connected. In case of India the method of financing the deficit is such that there is addition of purchasing power in the economy which creates demand inflation.
Deficit budget increases the unproductive and unnecessary govt. Continuous deficit budget adversely affects the flow of foreign investment into the country. Surplus budget Deficit budget Govt. It checks inflationary pressure.
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Budget is believed to have been derived from the French word Bougettee which literally means a small leather bag. We offer budget homework help in macroeconomics. Home» Macroeconomics Homework Help» Unbalanced Budget Unbalanced budget is one where the government’s estimated receipts are not equal to the proposed expenditure for a given period. Unbalanced budget may be a surplus or deficit budget.
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