Balanced Budget

Published Dec 24, 2022

Definition of Balanced Budget

A balanced budget is a budget in which total revenue is equal to total expenditure. That means the government does not spend more money than it takes in. This is usually achieved by cutting spending, raising taxes, or both.

Example

To illustrate this, let’s look at an imaginary country called country A. In 2020, the government has had a budget of USD 1 trillion. This budget includes the government’s spending on public services, such as healthcare, education, and defense. It also includes all the money the government takes in from taxes and other sources of revenue.

To achieve a balanced budget, the government must ensure that the total amount of money it spends is equal to the total amount it takes in. That is, it needs to take in exactly USD 1 trillion through taxes and other revenue streams. If the government spends more than it takes in, it will have a budget deficit. On the other hand, if it takes in more than it spends, it will have a budget surplus.

Why Balanced Budget Matters

A balanced budget is important for a number of reasons. First, it helps to ensure that the government does not spend more money than it takes in. This helps to prevent its country from going into debt, which can have serious economic consequences. Second, it helps to ensure that the government is not overspending on certain programs or services. Finally, it helps ensure that the government uses its resources efficiently and effectively.