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SubjectFree lesson

Balanced and unbalanced budget (I)

ClassNotes Team 2 MIN READUPDATED 12 JUL 2026

Economics SSS 2 Third Term

WEEK 3

Balanced and unbalanced budget (I)

Performance Objectives

Student should be able to:

  1. Explain the concept of budget deficit.
  2. Define budget surplus.
  3. Explain balanced budget.

Content

Definition of Budget

A budget refers to a financial statement of the total estimated revenue and the proposed expenditure of a government in a given period, usually a year.

Importance or uses of Budget

  1. Allocation of resources: Budget is usually used to allocate resources from one sector of the economy to another.
  2. Appraisal of government performance: Budget is used by the citizens and the international community to appraise the performance of the government.
  3. To foster economic growth and development: Budget is used generally to foster economic growth and development of a country.
  4. To communicate government economic objectives and policies: Government usually uses budget as a medium to communicate her economic objectives and policies to its people.

Meaning of balanced budget

A balanced budget of a government is a budget with revenue equal to expenditure. Alternatively, it occurs when the total estimated revenue of a government equal to the proposed expenditure.

Reasons for a balanced budget

  1. It prevents financial insecurity: Balanced budget usually prevent financial insecurity in the economy
  2. It helps control expenditure: Balanced budget is used by government to control financial expenditure
  3. It helps to curb excessive borrowing: Balance budget equally helps to prevent excessive borrowing by the government
  4. Reduction in interest payment on loans: Balanced budget equally helps to reduced interest on payment of loans.
  5. It aids or increases savings: Balanced budget helps the government to increase savings.

Meaning of surplus budget

A surplus budget occurs when government spending is less than government revenue in a given period. In this kind of budget, not all estimated revenue is proposed to be spent that year, meaning that there will be reserve.

Meaning of deficit budget

A budget deficit occurs when the government spending exceeds government revenue in a given period, usually a year. Alternatively, a budget is called a deficit when the government's total proposed expenditure for some time is more than the total estimated revenue.