NCERT Books Class 12 Macroeconomics Chapter 5- Government Budget and the Economy

Safalta Expert Published by: Noor Fatima Updated Mon, 18 Jul 2022 12:18 PM IST

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When you don't have access to a physical copy, digital NCERT Books Class 12 Macroeconomics PDF are always useful.
 
You may read NCERT Book for Class 12 Macroeconomics Chapter 5 Government Budget and the Economy here. You may find links to Class 12 Macroeconomics Notes, NCERT Solutions, Important Questions, Practice Papers, and more after each chapter.

Table of Contents
Topics Covered
Starting of the Chapter
Glimpses of the Chapter
PDF Link

The Chapter ' Government Budget and the Economy' explains the following-


5.1 GOVERNMENT BUDGET — MEANING AND ITS COMPONENTS
  • 5.1.1 Objectives of Government Budget
  • 5.1.2 Classification of Receipts
  • 5.1.3. Classification of Expenditure

5.2 BALANCED, SURPLUS AND DEFICIT BUDGET
  • 5.2.1 Measures of Government Deficit
 

Government Budget and the Economy Goes Like This-

We introduced the government in chapter one as denoting the state. We stated that apart from the private sector, there is the government which plays a very important role. An economy in which there is both the private sector and the Government is known as a mixed economy. There are many ways in which the government influences economic life. In this chapter, we will limit ourselves to the functions which are carried on through the government budget.

This chapter proceeds as follows. In section 5.1 we present the components of the government budget to bring out the sources of government revenue and avenues of government spending. In section 5.2 we discuss the topic of balanced, surplus or deficit budget to account for the difference between expenditures and revenue collection. It specifically deals with the meaning of different kinds of budget deficits, their implications and the measures to contain them. Box. 5.1 deals with fiscal policy and a simple description of the multiplier. The role the government plays has implications for its deficits which further affect its debtwhat the government owes. The chapter concludes with an analysis of the debt issue.


5.1 GOVERNMENT BUDGET — MEANING AND ITS COMPONENTS

There is a constitutional requirement in India (Article 112) to present before the Parliament a statement of estimated receipts and expenditures of the government in respect of every financial year which runs from 1 April to 31 March. This ‘Annual Financial Statement’ constitutes the main budget document of the government.

Although the budget document relates to the receipts and expenditure of the government for a particular financial year, the impact of it will be there in subsequent years. There is a need therefore to have two accounts- those thatrelate to the current financial year only are included in the revenue account (also called revenue budget) and those that concern the assets and liabilities of the government into the capital account (also called capital budget). In order to understand the accounts, it is important to first understand the objectives of the government budget.

5.1.1 Objectives of Government Budget

The government plays a very important role in increasing the welfare of the people. In order to do that the government intervenes in the economy in the following ways.

Allocation Function of Government Budget 

Government provides certain goods and services which cannot be provided by the market mechanism i.e. by exchange between individual consumers and producers. Examples of such goods are national defence, roads, government administration etc. which are referred to as public goods.

To understand why public goods need to be provided by the government, we must understand the difference between private goods such as clothes, cars, food items etc. and public goods. There are two major differences. One, the benefits of public goods are available to all and are not only restricted to one particular consumer. For example, if a person eats a chocolate or wears a shirt, these will not be available to others. It is said that this person’s consumption stands in rival relationship to the consumption of others. However, if we consider a public park or measures to reduce air pollution, the benefits will be available to all. One person’s consumption of a good does not reduce the amount available for consumption for others and so several people can enjoy the benefits, that is, the consumption of many people is not ‘rivalrous’.

Two, in case of private goods anyone who does not pay for the goods can be excluded from enjoying its benefits. If you do not buy a ticket, you will not be allowed to watch a movie at a local cinema hall. However, in case of public goods, there is no feasible way of excluding anyone from enjoying the benefits of the good. That is why public goods are called non-excludable. Even if some users do not pay, it is difficult and sometimes impossible to collect fees for the public good. These nonpaying users are known as ‘free-riders’. Consumers will not voluntarily pay for what they can get for free and for which there is no exclusive title to the property being enjoyed. The link between the producer and consumer which occurs through the payment process is broken and the government must step in to provide for such goods.

There is, however, a difference between public provision and public production. Public provision means that they are financed through the budget and can be used without any direct payment. Public goods may be produced by the government or the private sector. When goods are produced directly by the government it is called public production. 

Some Glimpses of the Chapter are-

 















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Download the NCERT Book for Macroeconomics, Class 12 in PDF.

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NCERT Book for Class 12 Macroeconomics Chapter 5 Government Budget and the Economy- PDF Download

Macroeconomics Chapter 5 Government Budget and the Economy

Where can you download ‘Government Budget and the Economy' PDF?

Candidates can download NCERT Books Class 12 Macroeconomics Chapter 5- Government Budget and the Economy PDF for free on our page. Links are given below.

Macroeconomics Chapter 5 Government Budget and the Economy

What topics are covered in ‘Government Budget and the Economy’ Chapter?

5.1 GOVERNMENT BUDGET — MEANING AND ITS COMPONENTS
  • 5.1.1 Objectives of Government Budget
  • 5.1.2 Classification of Receipts
  • 5.1.3. Classification of Expenditure

5.2 BALANCED, SURPLUS AND DEFICIT BUDGET
  • 5.2.1 Measures of Government Deficit

Are the CBSE Books for Class 12 Macroeconomics significant for board exams?

For higher courses and board exams, the chapters in the CBSE Books for Class 12 Macroeconomics are essential. For Class 12 Economics, students should read the chapter provided in the CBSE books. These examples and drill questions can help you get high marks.
 
We offer practice test questions to assist you sharpen your exam preparations and earn top grades. E-books can also be downloaded if you want to prepare even more thoroughly.

Is NCERT enough for Macroeconomics Class 12?

Yes, these are. The book can also assist in dispelling uncertainties. Studying from the NCERT Book for Class 12 Macroeconomics also has the following advantages:
  • The NCERT Books Class 12 Macroeconomics provides students with in-depth knowledge of economics.
  • The course books include illustrations that might aid students in comprehending the chapters.
  • These books can aid learners in independent study

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