Explain:
- Allocation of resources.
- Economic stability as objectives of government budget.
CBSE DELHI RE- PAPER SET 3 2018
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Objectives of government budget:
- Allocation of Resources: This objective of government is related with the allocation of resources to different areas. In a mixed economy, the private producers aim towards profit maximisation, while, the government aims towards welfare maximisation. The private sector always tend to divert resources towards areas of high profit, while, ignoring areas of social welfare. In such a situation, the government through its budgetary policy reallocates resources to maintain a balance between the social objectives of welfare maximisation and economic objective of profit maximisation. For example- government levies taxes on socially harmful goods such as tobacco, etc. and provides subsidies for the socially desirable goods such as food grains, kerosene, etc.
- Economic Stability: The government also aims at insulating the economy from major fluctuations (like inflation, unemployment) and business cycles such as boom, recession, depression and recovery. The government through its budgetary policy tries to combat such situations. The major concern of government is to achieve higher economic growth rates while maintaining price and employment stability. This state of economic growth with stability ensures a smooth and efficient functioning of an economy.
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