(i) 'Government Budget can be a useful instrument in reducing inequalities in the distribution of income and wealth in an economy.' Do you agree with the given statement ? Present valid arguments in favour of your answer. (ii) State the meaning and formula of Primary deficit. With valid reasons, classify the following into Capital receipts or Revenue receipts of the government : (i) Dividend received by the government from a Maharatan company. (ii) Receipts of the government from sale of shares of a Public Sector Undertaking (PSU) in open market. (iii) Debt cleared by Sri Lanka Government to the Indian Government.

Question

Accepted Answer

I agree that government budget can reduce inequalities.

Valid arguments:

1. Progressive Taxation:
- Higher tax rates for higher incomes
- Reduces disposable income of rich
- Ensures equitable distribution

2. Transfer Payments:
- Subsidies to poor
- Free services
- Social security schemes

3. Public Expenditure:
- Healthcare for all
- Education for all
- Infrastructure in rural areas

4. Wealth Redistribution:
- Inheritance tax
- Wealth tax
- Property tax

Examples:
- MGNREGA for rural employment
- Public Distribution System
- Free healthcare schemes

The budget is a powerful tool for reducing economic disparities and promoting social justice.