Important Concepts regarding Budget

By: EconomyWatch   Date: 30 June 2010

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Important Concepts regarding Budget are those which helps even a layman, to realize the various budget-related terminologies, as well as the their true meanings. These important concepts regarding budget are basically financial terms which facilitate a better understanding of the budgetary matters.

Some of the most important ideas regarding budget are stated and briefly illustrated below:

  • Budget Deficit: This is a common economic term, normally used to indicate a situation when the expenditures on governmental levels surpass its financial savings. As a matter of fact, Budget Deficits occur when the government does not plan its spendings, after considering the total amount of money it has saved.

In case there is a prolonged accumulation of Budget Deficit for several years or centuries, it gives birth to an economic phenomenon called Government Debts. When a country suffers from Government Debts, a considerable portion of the government spendings are then used for the repayment of these debts, having certain maturity. This maturity however, can be re-funded through issuing government bonds. In fact, Budget Deficit is regarded as a flow, while the Government Debts are considered to be stocks. Government Debts are just a aggregate flow of the Budget Deficits.

The definition of budgetary deficit essentially follows from that of the Governmental Debt. While the Government Debts are defined as the total amount of money owned by the government, Budget Deficit indicates the amount by which a savings escalates or a Government Debt grows.

  • Budget Crisis: This indicates a situation where both the executive and the legislature in a Presidential system of government comes to a standstill, and unable to pass a financial budget. This is a common feature of most Presidential form of governments across the world, where only the legislature has the power to pass a financial budget. However, the executive is also empowered to pass a veto, which consists of inadequate votes, sufficient to overrule the decisions taken.

The case is somewhat different in a Parliamentary form of government, where the rise of conditions like loss of supply leads to resignations and making of new elections. This however, makes a Budget Crisis to attain the form of a lengthy disagreement and argument.

Budget Crisis also emerges when the legislature possesses a suspension date authorized by the country's Constitution, and the financial budget is not passed till the date specified.

To know more on Important Concepts regarding Budget please see the following links:
  • Budget Planning
  • Budget Deficit
  • Budget Surplus
  • Budget Crisis
  • Budget Reform
  • Balanced Budget
  • Receipt Budget
  • Expenditure Budget

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