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What is a Federal Budget?
A federal budget is the government’s annual financial plan outlining expected revenues and proposed expenditures for a fiscal year at the national level.
Definition
Federal Budget refers to the comprehensive statement of a federal government’s planned income and spending, reflecting policy priorities, fiscal discipline, and economic strategy.
Key Takeaways
- Details government revenues and expenditures.
- Reflects fiscal policy priorities and trade-offs.
- Requires legislative approval.
- Influences economic growth, deficits, and public debt.
Understanding the Federal Budget
The federal budget is typically prepared by the executive branch and submitted to the legislature for debate, amendment, and approval. It covers spending on public services, defence, infrastructure, social programs, and debt servicing, alongside projected tax and non-tax revenues.
Budget outcomes can result in a surplus, balanced budget, or deficit. Persistent deficits add to public debt, while surpluses can reduce borrowing or fund reserves. Budget credibility and transparency are critical for investor confidence and macroeconomic stability.
Importance in Business or Economics
- Shapes fiscal policy and economic stimulus or restraint.
- Influences taxation, public investment, and social spending.
- Affects bond markets, interest rates, and investor confidence.
- Signals government priorities to businesses and households.
Types or Variations
- Balanced Federal Budget – Revenues equal expenditures.
- Deficit Federal Budget – Spending exceeds revenues.
- Surplus Federal Budget – Revenues exceed spending.
Related Terms
- Fiscal Policy
- Federal Deficit
- Public Debt
- Government Spending
Sources and Further Reading
- Investopedia — Budget (general concept)
- U.S. Government Accountability Office (GAO) — Federal Budget and Accountability
- International Monetary Fund (IMF) — Fiscal Policy and Budgeting
Quick Reference
- Annual national financial plan
- Revenues versus expenditures
- Core fiscal policy instrument
Frequently Asked Questions (FAQs)
Who approves the federal budget?
The legislature approves the federal budget after review and debate.
Does a deficit budget mean economic trouble?
Not necessarily. Deficits can be used to stimulate growth during downturns.
How does the federal budget affect businesses?
Through taxation, government spending, and investment priorities.
