State with reasons whether you agree or disagree with the following statements.
3. During the period of inflation, Surplus Budget is advisable.
Answer:
3. Yes, the above mentioned statement is correct. Inflation refers to the continuous increase in the general price level of the economy. This rise in the price level must be controlled by the government in order to safeguard the interests of the people. This can be done by increasing taxes and lowering government expenditure, thereby causing a reduction in the effective demand in the country. An increase in taxes and reduction in expenditure of the government will lead to a surplus budget. That is why we say that surplus budget is advisable during the period of inflation.
