Question

Explain the ‘reallocation of resources’ objective of Government Budget.

Hint:

Reallocation of resources through government budgeting ensures balanced economic development by using taxation, subsidies, and direct public sector involvement in key areas.

Answer 1

Reallocation of Resources: The government, through its budgetary policies, tries to reallocate resources to ensure the fulfillment of various socio-economic objectives. The government may influence the allocation of resources through: 
Taxation Policy: Heavy taxes may be imposed on harmful products to discourage their production, while subsidies may be provided for the production of socially useful products to encourage their growth. 
Direct Government Intervention: The government may directly undertake the production of certain goods and services in areas where the private sector may not be willing to participate in production activities.