- Government budgeting is the means by which government adjusts spending and tax rates.
- This directly influences fiscal policy.
- Impact on Economic Growth:
- Government spending on infrastructure can boost aggregate demand (short-run).
- It can also increase productive capacity (long-run).
- Tax reductions can increase disposable income, stimulating consumption/investment.
- Budgeting decisions allocate resources to various sectors, influencing their growth.
- It can be used to stabilize business cycles (expansionary/contractionary policy).
Diagram: Budget Classification
- Zero-based Budget: A budgeting approach starting from scratch to ensure relevance and efficiency.
- Outcome Budget: A strategy to convert financial outlays into measurable outcomes.
- Gender Budget: A budgeting method that promotes gender equality through resource allocation.