1. Reallocation of resources :- In case, the market economy fails or does not achieve the desired social objectives, the government has to interfere through budget and reallocate resources accordingly. Through its budgetary policy, the government of a country directs the allocation of resources in a manner such that there is a balance between the goals of profit maximization and social welfare. Production of goods which are injurious to health is discouraged through heavy taxation. On the other hand, production of ‘socially useful goods’ is encouraged through subsidies. 2. Redistribution of Income :- Every economy strives to attain a society, where inequality of income and wealth should be minimum. In order to achieve this objective through govt. budget the government 37 spends sufficient money on social security schemes, economic subsidies and public works etc.
How government reallocates the resources and redistributes the income through Budget?
Answers
Narendra Rajput
1. Reallocation of resources :- In case, the market economy fails or does not achieve the desired social objectives, the government has to interfere through budget and reallocate resources accordingly. Through its budgetary policy, the government of a country directs the allocation of resources in a manner such that there is a balance between the goals of profit maximization and social welfare. Production of goods which are injurious to health is discouraged through heavy taxation. On the other hand, production of ‘socially useful goods’ is encouraged through subsidies.
2. Redistribution of Income :- Every economy strives to attain a society, where inequality of income and wealth should be minimum. In order to achieve this objective through govt. budget the government 37 spends sufficient money on social security schemes, economic subsidies and public works etc.