Question

Write any four functions of the Budget.

Hint:

The redistribution function is also known as the "Distributional Function." It specifically targets "equity" in society, while the allocation function targets "efficiency."

Answer 1

Step 1: Understanding the Concept:
A government budget is an annual financial statement presenting the estimated receipts and expenditures for a fiscal year.
It serves as a primary tool for implementing government socio-economic policies.
Step 2: Detailed Explanation:
The four key functions of the budget are:
1. Allocation Function: The government provides certain goods and services (public goods) like defense, street lighting, and parks that the market mechanism cannot provide. The budget allocates resources between private and public sectors.
2. Redistributive Function: To achieve social justice, the government uses the budget to reduce inequalities in income and wealth. This is done through progressive taxation on the rich and providing subsidies or social security to the poor.
3. Stabilization Function: The government aims to avoid economic fluctuations (inflation or recession). By adjusting spending and taxes, the budget helps maintain a stable price level and high employment.
4. Economic Growth: Through the budget, the government incentivizes savings and investment. Providing tax breaks for infrastructure projects promotes long-term economic expansion and increases the GDP.
Step 3: Final Answer:
The budget functions as a roadmap for resource allocation, wealth redistribution, economic stabilization, and fostering growth in a nation.