Budget Surplus

By: EconomyWatch   Date: 30 June 2010

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A Budget Surplus arises in a country when the total revenue earning surpass that of expenditure in a particular financial year. Budget Surplus is very important in the sense that at the time of covering the budget deficit, it brings about a decrease in the net public debt. Like Budget Deficit, Budget Surplus also exert indirect influence on the tax payers.

Other facts about Budget Surplus:

Budget Surplus refers to the amount by which the income of an individual, company or government surpasses that of the expenditures within a specified time period. Normally, it is not essential on the part of the government to maintain a Budget Surplus, though it needs to be very careful at the time of running the Budget Deficit. Under normal circumstance, the economists have a tendency to remain worried about the consequences, in case the Government Debts undergo a sharp increase, as a proportionate part of the country's Gross Domestic Products (GDP). This is indeed a matter of serious concern, as the Government Debts are the sole mean to fund the financial deficits arising in a country. Moreover, the amount paid as interests also increases in proportion to the GDP, until there is enough reduction in the average rate of interest paid to the debts on governmental level. A rise in the load of interest indicates that the government revenues will be utilized for payment of the financial costs, rather than being used for the country's production.

On governmental levels however, the companies as well as the individuals need not assure the fact whether their budgets are balanced or surplus in nature, although they need to be totally aware about the cost of their interests, which form a proportionate part of their incomes.

Different views on Budget Surplus:
  • According to a handful of economists, the manipulation of the Budget Surplus on governmental level serves as an effective medium for hastening or slackening the economic development of a country.
  • Another set of economists opine that manipulation of the Budget Surplus only affects the economy, by bringing about a change in the price level. This is because the real production is determined on the basis of factors like changes in the technological conditions, the labor force and the productivity of the labor class.

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