What is Balanced Budget?
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A balanced budget is a situation in financial planning or the budgeting process where total expected revenues are equal to total planned spending. This term is most frequently applied to public sector (government) budgeting. A budget can also be considered balanced in hindsight after a full year's worth of revenues and expenses have been incurred and recorded.
Definition
A balanced budget refers to a financial planning or budgeting process where total expected revenues equal total planned expenditures. This term is most commonly applied in the budgeting of the public sector (government). After all anticipated annual revenues and expenditures have occurred and been recorded, the budget can also be considered balanced.
Origin
The concept of a balanced budget originated from the need for government fiscal management, particularly in the late 19th and early 20th centuries, as modern state fiscal systems were established. Achieving a balanced budget became a key goal of government fiscal policy to ensure effective management of public funds without increasing debt.
Categories and Features
Balanced budgets can be categorized into annual balanced budgets and cyclically balanced budgets. An annual balanced budget means that each fiscal year's revenues and expenditures are equal, while a cyclically balanced budget considers economic cycle fluctuations, allowing for deficits during recessions and surpluses during booms. The main features of a balanced budget are its stability and predictability, which help avoid excessive borrowing and debt accumulation.
Case Studies
A typical case is Germany's
