Answer to Question #209538 in Microeconomics for Y, Smith

Question

Explain governmental budget, its primary purpose, and its three distinct components. Explain step by step the governmental budget cycle process.

Answer 1

The government budget is an annual financial statement that presents governments anticipated revenue and estimated government expenditures in a particular financial year. Its primary purpose is to ensure economic stability by controlling different phases of business fluctuation through the budget. The components of the budget include a surplus budget, deficit budget, and a balanced budget. A surplus budget occurs when the expected government revenue exceeds the government expenditure. A deficit budget happens when government expenditure exceeds expected government revenue, and a balance deficit occurs when the expected revenues equal government expenditure in a particular financial year.

The governmental budget cycle process

preparation and submission: this phase involves creating a budget at the ground level.

 Approval: After the budget is prepared s it is then submitted to the legislative body for approval.

 Execution: once the budget is approved, it is implemented in this phase.

Audit and evaluation: the budget is later evaluated to check whether the objectives are achieved and also adjusted if not met.