Knowledge Checkpoint: Describe the three types of budget: deficit, surplus and balanced
- A deficit budget is when government spending exceeds the revenue it collects, typically through taxes. This situation often occurs during periods of economic contraction, with automatic fiscal stabilisers reducing tax revenue and increasing spending to support the economy.
- A surplus budget is when government revenue exceeds its spending. This scenario tends to occur when the economy is strong, with automatic fiscal stabilisers increasing tax revenue and decreasing spending when the economy is overheating.
- A balanced budget occurs when government revenue equals its spending.