Which of the following budgets will increase government expenditure?

1. Analyze the question The question asks which type of budget leads to an increase in government expenditure. We need to compare what each budget type means for spending versus revenue.

2. Explain the concept

• Zero-base budget: Every expense must be justified from scratch each period, with no automatic carry-over from past budgets. It is a method of preparing a budget, and it is used to control or cut waste, not to raise spending.
• Surplus budget: Planned revenue is greater than planned expenditure. The government spends less than it earns. This is used to fight inflation.
• Deficit budget: Planned expenditure is greater than planned revenue. The government deliberately spends more, often to stimulate the economy during recession or unemployment, and funds the gap through borrowing or printing money.
• Balanced budget: Revenue equals expenditure. Spending stays level with income, so there is no deliberate increase.

3. Step-by-step solution

• A: Zero-base budgeting focuses on justifying and controlling spending. It does not increase it. ❌
• B: A surplus budget means spending is lower than revenue. ❌
• C: A deficit budget means spending exceeds revenue, so government expenditure is raised above income. ✅
• D: A balanced budget keeps spending equal to revenue. ❌

4. Answer The budget that increases government expenditure is the deficit budget, which is option C.

5. Exam tip Remember: Deficit = Dig deeper into spending (expenditure > revenue), used to fight deflation/unemployment. Surplus = Save (revenue > expenditure), used to fight inflation. Tie each budget type to its macroeconomic purpose and these questions become easy.