Budget Constraint

A budget constraint is an accounting identity that describes the consumption options available to an agent with a limited income to allocate among various goods. It is important to understand that the budget constraint is an accounting identity, not a behavioral relationship. For a country, the condition that the value of exports equals the value of imports or, if capital flows are permitted, that exports minus imports equals the net capital outflow. It is equivalent to income from production equaling expenditure on goods plus net acquisition of foreign assets.