Examples of cyclically balanced budget in the following topics:
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- Balanced budgets, and the associated topic of budget deficits, are a contentious point within both academic economics and politics.
- A balanced budget, particularly a government budget, is a budget with revenues equal to expenditures.
- A cyclically balanced budget is a budget that is not necessarily balanced year-to-year, but is balanced over the economic cycle, running a surplus in boom years and running a deficit in lean years, with these offsetting over time .
- John Maynard Keynes founded the Keynesian school, which promotes balanced governmental budgets over the course of the business cycle as opposed to annual balanced budgets.
- Describe arguments against maintaining a balanced budget in the United States
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- However, even Keynesians that support deficit spending during recessions advise that governments balance this deficit spending with surpluses during the eventual economic boom.
- This is known as a cyclically balanced budget; the government runs a deficit during recessions and lean years but a surplus during periods of significant growth.
- Since Congress is responsible for making budgetary, spending and taxation decisions, and because these elected officials may be disinclined to do anything that would hurt their chances to be re-elected, taking the necessary steps to balance out the periods of deficit spending during economic boom is difficult.
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- In economics and political science, fiscal policy is the use of government budget or revenue collection (taxation) and expenditure (spending) to influence economic.
- Government spending is fully funded by tax revenue and overall the budget outcome has a neutral effect on the level of economic activity.
- Even with no changes in spending or tax laws at all, cyclic fluctuations of the economy cause cyclic fluctuations of tax revenues and of some types of government spending, which alters the deficit situation; these are not considered to be policy changes.
- Therefore, for purposes of the above definitions, "government spending" and "tax revenue" are normally replaced by "cyclically adjusted government spending" and "cyclically adjusted tax revenue".
- Thus, for example, a government budget that is balanced over the course of the business cycle is considered to represent a neutral fiscal policy stance.
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- A government's budget balance is determined by the difference in revenues (primarily taxes) and spending.
- A positive balance is a surplus, and a negative balance is a deficit.
- A cyclical deficit is a deficit incurred due to the ups and downs of a business cycle.
- By definition, the cyclical deficit will be entirely repaid by a cyclical surplus at the peak of the cycle.
- Unlike the cyclical budget deficit, a structural deficit is the result of discretionary, not automatic, fiscal policy.
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- The cash budget includes the beginning balance, detail on payments and receipts, and an ending balance.
- A cash budget is a prediction of future cash receipts and expenditures for a particular time period, usually in the near future.
- The cash flow budget helps the business determine when its income will be sufficient to cover its expenses and when the company will need to seek outside financing.
- Accounts receivable, also known as Debtors, is money owed to a business by its clients (customers) and shown on the business's balance sheet as an asset.
- One of the assets listed is cash, which factors into the overall budget.
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- Government spending is fully funded by tax revenue and overall the budget outcome has a neutral effect on the level of economic activity.
- However, these definitions can be misleading as, even with no changes in spending or tax laws at all, cyclic fluctuations of the economy cause cyclic fluctuations of tax revenues and of some types of government spending, altering the deficit situation; these are not considered to be policy changes.
- Thus, for example, a government budget that is balanced over the course of the business cycle is considered to represent a neutral fiscal policy stance.
- Governments can use a budget surplus to do two things: to slow the pace of strong economic growth and to stabilize prices when inflation is too high.
- When the government runs a budget deficit, funds will need to come from public borrowing (government bonds), overseas borrowing, or monetizing the debt.
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- However, budgeting should either build these into the current budget forecast or utilize them during the next calculation of budgetary requirements.
- The adjusted net income method starts by calculating operating income (EBIT or EBITDA) and adding/subtracting short-term changes in the balance sheet, such as those that occur to inventories, payable, receivables and other short-term.
- By using a pro-forma balance sheet for the upcoming period being budgeted for, the short-term assets and liabilities (if accurately projected) will underline the amount of cash that should be set aside for budgeting purposes.
- A third option for projecting cash budgets is accrual reversal.
- Budgeting is an estimation, often adjustments over time.
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- An extension of the cash flow forecast concept is the operating budget.
- "A budget is a financial document used to project future income and expenses.
- Then, as the year unfolds, actual income and expenses are posted to the accounting records, and compared to what was budgeted, and a variance from budget for each item budgeted (e.g. sales, selling expenses, advertising costs, etc) is calculated.
- Most organizations take budget variance to date into consideration each month, and then prepare a revised budget (or forecast) for the balance of the year.
- This step is particularly important if variances to date vary from the original budget in a major way.
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- The twin deficits hypothesis is a concept from macroeconomics that contends that there is a strong link between a national economy's current account balance and its government budget balance.
- If (T-G) is negative, we have a budget deficit.
- Thus, budget deficits and trade deficits go hand-in-hand .
- The twin deficits hypothesis implies that as the budget deficit grows, net capital outflow from a country falls.
- The red line represents net imports, which is equivalent to the negative balance of trade, and the black line represents net borrowing, which is equivalent to the government budget deficit.
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- The visual scorecard is a graphic analogy of the balanced scorecard framework and a key visual link between performance and strategy.
- A balanced scorecard is the sum of all relevant inputs; the visual scorecard is the graphic representation of findings or results.
- The cyclical visual scorecard with four components (financial, internal, innovation, and customer) is a very common design that successfully bridges performance and strategy.
- Visual scorecards make the data in balanced scorecards instantly readable.
- Produce a visual representation of a balanced scorecard for communication and meetings