Surplus Budget

Government budget is said to be surplus, when estimated Government receipts are more than the estimated Government Expenditure. i.e anticipated Government Receipts > estimated Government expenditure.

A surplus budget may prove useful during the period of inflation. In the period of Inflation, there is a tendency for prices  to rise rapidly. This needs to be checked, particularly in the interest of those who have more or less a fixed income. The rise in the prices can be checked by lowering the level of effective demand in the economy. This can be done by increasing taxes which would increase the revenue of the government and reduce the purchasing power of the people. As a result, the aggregate demand will fall leading to downward movement in the price level. Thus, inflationary pressures can be controlled.

However, a surplus budget should not be used in the situations other than inflation as it may lead to unemployment and low levels of output in an economy.