Final answer:
Incremental budgeting typically refers to giving an agency slightly more funds than it had in the previous year. It is a common method that adjusts the baseline budget marginally. Marginal analysis is an essential approach used in making incremental budgeting decisions.
Step-by-step explanation:
An example of incremental budgeting is e. giving an agency a little more than it had last year. Incremental budgeting involves adjusting the previous period's budget by a certain amount, which can be an increase or a decrease. This approach assumes that the baseline (the previous year's budget) is valid and then adjusts it marginally for the new budget cycle.
Budgeting is an essential tool for managing finances as it allows individuals and organizations to plan and track income and expenditures. However, it can be difficult due to the necessity of making choices and the opportunity costs involved with each financial decision.
Marginal analysis plays a significant role in budgeting decisions. It involves examining the incremental benefits and costs of changing a budget by a little rather than making drastic changes. This type of analysis helps in making decisions that optimize financial outcomes.