how surplus and deficit budget control inflation and deflation??
The answer given by Pratik is correct. A surplus budget implies that the revenue generated by the government from tax and non-tax sources is higher than the expenditure incurred by it. This reduces the supply of money prevailing in the economy as people are left with less money to spend due to an increase in revenue generated by government from people. A fall in money supply leads to a decrease in general price level and hence, a decrease in inflation.
The vice-versa of above holds true in case of deficit budget.
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The vice-versa of above holds true in case of deficit budget.
if you still have any doubt in this question, do get back to us.