Briefly explain the main idea of functional finance and how it compares with the traditional balanced budget?

Simply put, functional finance mainly focuses on the needs of economic and social development, such as when the economy is in a recession, increase fiscal expenditure and implement deficit finance in order to promote economic development, and when the economy is overheated, tighten fiscal expenditure to stop inflation, which may result in a fiscal surplus.

The traditional balanced budget, on the other hand, focuses mainly on the balance of the treasury itself, allowing neither excessive deficits nor surpluses. This is tantamount to fundamentally negating the government's role in regulating and intervening in the economy.

By and large, before the emergence of Keynesianism, the theory of neoclassical economics is dominant, generally believe that the market is efficient, can automatically regulate the economy to achieve full employment, do not need the government to intervene, and therefore in the fiscal policy to balance the budget. After Keynesianism, the concept of state intervention in the economy has become increasingly popular, and gradually dominated the financial performance is to replace the traditional balanced budget with functional finance.