The practice of developing reasonably challenging budgets tend to :
a. discourage and creative thinking as there is very little room for error
b. increase anxiety without motivation not meeting them is viewed as a failure
c. set unrealistic expectations and are perceived as overly ambitious and unachievable
d. motivate improved performance as employees work more intensely to avoid failure

D. motivate improved performance as employees work more intensely to avoid failure                              

Explanation:

Budgets in an organization is the strategies to which company uses to achieve its goal. It also helps to reorganized their strategies and plans towards the goal and optimizes the resources available.

It is to coordinate the strategies and plans to implement a plan.

It is the initial plan that the company intends to achieve in a period accounting to both financing and operating decisions.

Organization tries to develop challenging budgets to motivate the employees  to improve their performance to avoid failure. It is the end product of negotiation as the management wants more output while the subordinates want easy targets to complete.

Thus it is used as a motivation to improve performance.

Therefore the answer is ---

D. motivate improved performance as employees work more intensely to avoid failure

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