Question

Which one of the following functions is NOT the objective of government budget.

• A. Allocation.
• B. Consumption
• C. Redistribution.
• D. Stabilisation.

Hint:

Remember Musgrave's Three Functions of Budget:
1. Allocation
2. Redistribution
3. Stabilisation

Answer 1

The Correct Option is B

Concept:
The government budget is an annual financial statement detailing estimated receipts and expenditures.
According to public finance theory (formulated by Richard Musgrave), government fiscal operations serve three classical budgetary objectives.

Step 1: The Three Primary Objectives of Government Budget:
1. Allocation Function: Directing resource allocation between public and private goods where the private market fails to provide adequate infrastructure or merit goods.
2. Redistribution Function: Mitigating income and wealth disparities through progressive direct taxation and targeted transfer payments.
3. Stabilisation Function: Managing aggregate demand via countercyclical fiscal measures to prevent severe inflation or high unemployment.

Step 2: Identifying the Non-Objective:
Consumption is an economic activity undertaken by households and governments, but it is not an administrative objective or function of fiscal policy.
Final Answer:
Consumption is NOT an objective of the government budget. Thus, option (B) is correct.