Question

What are the objectives of government budget?

Hint:

Through the budget, the government acts as a stabilizer to prevent the economy from extreme "boom" or "bust" cycles.

Answer 1

Step 1: Understanding the Concept:
A government budget is an annual financial statement showing estimated receipts and expenditures. Its primary goal is to promote economic growth and social welfare.

Step 2: Identifying Key Objectives:
The government uses the budget to intervene in the economy for several reasons:

• Reallocation of Resources: Using taxes and subsidies to encourage social goods (like schools) and discourage harmful goods (like tobacco).
• Reducing Inequalities: Implementing progressive taxation (taxing the rich more) and spending on the poor to redistribute income.
• Economic Stability: Managing inflation or deflation by adjusting spending and tax rates.
• Management of Public Enterprises: Providing funds for the operation of government-owned industries (PSUs).

Step 3: Economic Growth:
By increasing the rate of savings and investment through tax rebates, the budget aims to increase the overall GDP of the country.

Step 4: Final Answer:
The main objectives are resource reallocation, income redistribution, economic stability, and growth.