How do you think balancing happens - meaning, what type of factors should be considered when...

How do you think balancing happens - meaning, what type of factors should be considered when the government cuts funds from one program to fund another?

Expert Solution

The source of income of government is through taxes . The government spends in various sectors of the economy . The balance between income and expenditure is budget . Government funds are allocated in programs where the government has to interfere to maximize social benefits . It is allocated in such programs where there is positive externality , such as education , healthcare . Government has limited funds , so allocation is done based on several factors .

Firstly , the sectors in which private sector will not invest at all such as infrastructure ( roads , bridges etc ) . Secondly , healthcare is another important program where the fund should be allocated in order to develop human capital . The program that requires immediate intervention should be dealt first . As for example if private sector education cost if too exorbitant and unaffordable for the poor then government has to provide education at a lower cost to increase literacy . The program that is most neglected such as agricultural welfare , income inequality etc should be allocated some funds .

Hence when government cuts funds from one program to fund another the most important factor that is considered is immediate governmental support and maximization of social welfare .

Rahul Sunny answered 8 months ago

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