How can the government impact allocation of resources through its budgetary policy?
How can the government impact allocation of resources through its budgetary policy?
Following observations highlight how the government can impact allocation of resources through its policy:
(i) The government can offer subsidies on such goods (like coarse cloth) the production of which is essential for poorer sections of the society. So that, the resources are shifted from the production of 'goods for the rich' to the production of 'goods for the poor'.
(ii) The government can grant 'tax holiday' to induce investment in the production of essential goods like 'life saving drugs'. So that the resources are shifted from the production of non-essential drugs to the life-saving drugs.
(iii) The government can impact allocation of resources by shifting its own investments from inefficient to efficient units of production. Also, allocation of resources would be impacted when the government increases investment on the production of public goods.
(iv) High taxation can be imposed on such goods (like cigarettes and liquor), the production of which is harmful to the society. Accordingly, the resources would shift to the production of socially useful production activities.
(v) The government can make larger budgetary allocations for its 'Support Price Policy' in favour of food crops. This would shift resources from non-food crops to food crops. This would make the country self-sufficient food grain production.
Following observations highlight how the government can impact allocation of resources through its policy:
(i) The government can offer subsidies on such goods (like coarse cloth) the production of which is essential for poorer sections of the society. So that, the resources are shifted from the production of 'goods for the rich' to the production of 'goods for the poor'.
(ii) The government can grant 'tax holiday' to induce investment in the production of essential goods like 'life saving drugs'. So that the resources are shifted from the production of non-essential drugs to the life-saving drugs.
(iii) The government can impact allocation of resources by shifting its own investments from inefficient to efficient units of production. Also, allocation of resources would be impacted when the government increases investment on the production of public goods.
(iv) High taxation can be imposed on such goods (like cigarettes and liquor), the production of which is harmful to the society. Accordingly, the resources would shift to the production of socially useful production activities.
(v) The government can make larger budgetary allocations for its 'Support Price Policy' in favour of food crops. This would shift resources from non-food crops to food crops. This would make the country self-sufficient food grain production.
