Two friends Komal and Ritika were discussing the Government budget quot Through its budgetary policy...........

Economics (CUET) Government Budget and Economy

Two friends Komal and Ritika were discussing the

Government budget.

"Through its budgetary policy the government of a country directs the allocation of resources in a manner such that there is a balance between the goals of profit maximisation and social welfare".

The above-mentioned statement was given by Komal, identify the objective of Government budget was she talking about?

Redistributive activities

Activities to secure a reallocation of resources

Stabilising activities

None of these

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Explanation:

Option (2) is correct.
Explanation: Private enterprises always desire to allocate resources to those areas of production where profits are high. However, it is possible that such areas of production (like production of alcohol) may not promote social welfare. Production of goods which are injurious to health (like cigarettes and alcohol) is discouraged through heavy taxation. On
the other hand, production of "socially useful goods" (like electricity, 'Khadi') is encouraged through subsidies. So, finally government has to reallocate resources in accordance with social and economic considerations in case the free market fails to do or does so inefficiently.