question_answer

Explain the 'redistribution of income' objective of a government budget.

Or

Explain the 'economy stability' objective of a government budget.

 

Answer:

Redistribution of income and wealth or redistribution of wealth is the transfer of income, wealth or property from some individuals to others. Government through its budgetary policy attempts to promote fair and right distribution of income in an economy. This is done through taxation and expenditure policy. Through its taxation policy, government levies taxes on the higher income groups in the economy and transfers the purchasing power (so extracted) to the poor sections of the society through its expenditure policy (subsides, transfer payments, etc.). Thus, with the help of the taxation and expenditure policy, government aims at redistribution of income such that a fair and just distribution of income is achieved in the society.

Or

Ensuring economic stability is one of the important objectives of a government budget. Government aims at insulating the economy from major economic fluctuations (such as inflation, unemployment, etc.) and the business cycles such as boom, recession, depression and recovery. It aims at achieving higher economic growth rate while combating such situations. Through the budget policy, government aims at maintaining price and employment stability. This state of economic growth with stability ensures a smooth and efficient functioning of an economy.