MEANING OF SURPLUS AND DEFICIT BUDGET. A budget surplus occurs when government spending is less than government revenue in a given period of time.
In other words, a budget is called a surplus, when the total estimated revenue is more than the proposed expenditure. In this kind of budget, not all estimated revenue is proposed to be spent in that year, meaning that there will be a reserve.
budget surplus and deficit budget
Explain the concepts of budget surplus balanced budget and the component of national debt.
Explain the concept of and criteria for revenue allocation (including resource control) in Nigeria and associated problems
A budget surplus occurs when a government\’s revenue exceeds its expenditures over a given period, typically a fiscal year.
It means that the government has generated more income than it has spent on various programs, services, and debt payments during that period.
When a budget surplus is achieved, it can have several implications:
Debt Reduction: A budget surplus allows the government to allocate funds towards paying off existing debts.
This can help reduce the overall debt burden and interest payments, which can free up resources for other purposes in the future.
Infrastructure and Public Investments: Surpluses can be utilized to invest in infrastructure projects, such as building or improving roads, bridges, schools, hospitals, and other public facilities. These investments can stimulate economic growth and provide long-term benefits to society.
Tax Reductions: Budget surpluses may provide an opportunity for the government to lower taxes.
By reducing the tax burden on individuals and businesses, it can stimulate consumer spending and investment, thereby potentially boosting economic activity.
Savings and Reserves: Surpluses can be set aside as savings or reserves to be used during periods of economic downturn or emergencies. These funds can act as a cushion to mitigate the impact of future deficits or unforeseen circumstances.
However, it\’s worth noting that a budget surplus is not always viewed positively. Some argue that it indicates that the government is overtaxing its citizens, leading to excessive revenue collection.
definition of budget surplus
- Deficit Budget: A budget deficit occurs when government spending exceeds government revenue in a given period of time, usually a year.
In other words, a budget is called a deficit when the government’s total proposed expenditure for a period of time is more than the total estimated revenue.
When it refers to federal government spending, a budget deficit is also known as the “national debt”. The opposite of a budget deficit is a budget surplus and when inflows are equal to outflows, the budget is said to be balanced.
- economic tools for nation building
- private enterprises
- limited liability companies
- market concept
- money market
- how companies raises funds for expansion
Causes of low capital formation in West African Countries
The causes of low capital formation in West African countries include:
Existence of a vicious circle of poverty: The existence of low income results in low savings and in turn results in a shortage of capital for investment, which results in low investment.
Low investment leads to low, output, and eventually to low income. The low income result again to low savings and the vicious circle continues.
Wasteful expenditure: Many governments in West African countries are involved in wasteful expenditure as they embark on prestigious but productive ventures thereby resulting in low capital formation
Inequitable distribution of income: In many West African countries, only individuals are rich while the poor. Even the few rich ones spend their money on prestigious projects which are on-productive and these generally give rise to low capital formation.
Higher propensity to consume: In many West African countries, the propensity to consume by the people is higher than the propensity to save.
There is a high taste for imported goods, e.g. cars, television, rice and clothing materials. This high propensity to consume results in low savings and investment.
Low saving: Many working-class people in West Africa do not have the habit of saving and are usually poor.
This may be due to their low earnings, which may not be enough for them to spend not to talk of saving. This usually affects negatively capital formation can be solved when the above problems