Balanced Budget

Government budget is said to be balanced, when estimated revenue and expenditure of the government are equal. That is, Government Receipts = Government Expenditure.

The concept of a balanced budget was advocated by the classical economists like Adam Smith. It was considered as neutral in its effect on the working of the economy and hence, they regarded it as the best.

However, modern economists believe that the policy of balanced budget may not always be suitable for the economy. The modern Governments are welfare entities and hence, they cannot keep their expenditure at the level of their receipts.