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Ordinarily, a Budget is defined as the projected income and expenditure for a specific period.

However, In macroeconomics, a budget refers to the financial plan that outlines the government's estimated income and expenditure for the coming year.

Although both the federal and state governments make budgets, we will be concentrating on the federal budget or national budget today.

National Budget

A national budget is the estimate of a country's overall income and expenditure for a given period.

The national budget is usually prepared by the finance minister and represents the budget of the whole country,

One important feature of most national budgets is that they serve as important instruments in achieving macroeconomic goals.

This is because the budget is another component of a country's fiscal policy.

At any point in time, the national budget can be in any of the following:

1. Balance budget: National budget is said to be balanced when the budgeted receipts of the government are equal to the planned expenditures of the government.

In other words, a balanced national budget is one in which total income is equal to total expenditure so that there is no budget deficit or a budget surplus. 

A balanced budget usually occurs when the government's total earnings from tax and other levies are equal to the amount of money expended on public and social welfare

2. Budget deficit: When total estimated expenditures exceed the total estimated income, the result is a budget deficit.

It can also be defined as the excess of government expenditure over receipt at a given period.

3. Budget surplus: When total estimated income exceeds total estimated expenditure, the result is budget surplus.

Alternatively, the budget surplus can also refer to the excess of government receipts over expenditures at a given period.

Components Of National Budget

There are two main components of the national budget, viz: income and expenditure.

Budget income

This is the total estimated receipt of government for a given fiscal period.

Budget income can be bifurcated into revenue income and capital income.

1. Revenue income: This is the total amount of money received that does not result in a liability or a reduction in the government's assets.

It includes income tax, corporate tax, value-added tax, excise duty, commercial revenue, administrative revenues, license fees and fines.

2. Capital income: Unlike revenue income, this either creates liability or reduces the assets of the government.

It includes recovery of loans, internal and external borrowings, etc.

Budget expenditure

This is the total estimated expenditure of the good government for a given fiscal period 

Like budget income, budget expenditure can be bifurcated into revenue expenditure and capital expenditure.

1. Revenue expenditures: This category includes spending that neither creates assets nor reduces the government's liabilities.

Interest payments, salary payments, healthcare expenditures, and subsidies are examples of revenue expenditures

2. Capital expenditure: This either results in the creation of assets or a reduction in the government's liabilities.

Examples are loans to the state government, expenditure on roads and repayment of loans.

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