Balanced Budget

Balanced budget is a rare situation when a government's income which primarily comes from taxes and duties, etc., equals its total expenditures, such as defense, social security, science, energy and expenditure on infrastructure, etc.

Balanced budget is a situation which is in-between budget deficit and budget surplus. Budget deficit is when a government's expenditures exceeds its total income while budget surplus is a situation when a government's total income exceeds its total expenditures.

A government runs a balanced budget when it does not want to mess with the economy. While a budget deficit expands an economy and a budget surplus contracts it, a balanced budget on the other hand leaves the economy alone. Balanced budget means nuetral fiscal policy.


A balance budget is when

Government's Expenditures − Government's Income = 0


The United States federal budget for financial 1913 and 1914 is a good example of balanced budget.

In financial year 1913 the government's expenditures amounted to $715 million while its income was $714 million. We can say that the government's total expenditures roughly equaled its total income.

In recent decades, we rarely see a balanced budget mostly because government are more actively using fiscal policy to influence the economy.

by Obaidullah Jan, ACA, CFA and last modified on is a free educational website; of students, by students, and for students. You are welcome to learn a range of topics from accounting, economics, finance and more. We hope you like the work that has been done, and if you have any suggestions, your feedback is highly valuable. Let's connect!

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