Through its Budgetary policy the government directs the allocation of resources in a manner such that there is a balance between the goal or of profit maximization and social welfare. Government can provide subsidy and reduction in tax rate to motivate investment into areas where private sector initiative is not coming. Production of goods which are injurious to social life is discouraged through heavy taxation.
Explain the “Reallocation of resources” objective of a government budget.
Answers
Anirudh Yadav
Through its Budgetary policy the government directs the allocation of resources in a manner such that there is a balance between the goal or of profit maximization and social welfare. Government can provide subsidy and reduction in tax rate to motivate investment into areas where private sector initiative is not coming. Production of goods which are injurious to social life is discouraged through heavy taxation.