Balanced budget

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Updated: Aug 20, 2021

The central government budget is in balance when current receipts are equal to current expenditure. Broadly, that is to say, taxes on income and expenditure, etc., are sufficient to meet payments for goods and services, interest on the national debt, etc. In practice, the U.K. budget has generally been in deficit since the end of the Second World War; during the inter-war period the balancing of the central government budget was deemed a sign of good ‘house­keeping’. Keynes, however, showed how the budget surpluses and .deficits could be used to regul-ate the economy. It should be remembered that a balaneed budget does not necessarily have a neutral effect on the economy. For instance, if the government raised taxes on the rich to give assistance to the poor, the budget would have a multiplier effect and generate additional incomes overall. This is because the propensity to save of the rich is higher than that of the poor

Reference: The Penguin Business Dictionary, 3rd edt.



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James Knight
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James is the Editor of Education for Invezz, where he covers topics from across the financial world, from the stock market, to cryptocurrency, to macroeconomic markets.... read more.