Question

In a government budget , estimated receipts exceed estimated expenditures during a fiscal year, this situation can be used to deal with which of the following situation?

(a) Inflation
(b) Deflation
(c) Both (a) and (b)
(d) Neither (a) nor (b) (d )

choose tthe correct option with Explaination​

Answer 1

a - inflanation is the correct answer .

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Answer 2

In a government budget, estimated receipts exceed estimated expenditures during a fiscal year. This situation can be used to deal with inflation. (option a)

What is inflation?

• Inflation refers to an increase in the price of commodities in a country during a fiscal year.
• As the cost of living increases due to inflation, people tend to buy a lesser amount of goods and services. Thus, the purchasing power of people also decreases.
• The causes for inflation can vary, but a surge in demand for a particular product is a common cause.

Estimated Receipts and Estimated Expenditures

• Estimated receipt refers to the amount of cash expected to be received by the government.
• Estimated expenditure refers to the amount of cash expected to be utilized in the maintenance and expenditures of the country.
• If estimated receipts exceed estimated expenditures, then the government will be in surplus.
• This surplus money can be used to overcome inflation if the country is currently going through it.

Thus, the correct answer is (a) Inflation.