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Question : 9
Total: 52
In order to tackle the problem of rising general price in an economy, government may come up with a surplus budget to achieve the budget objective of _______.
(i) reallocation of resources
(ii) price stability
(iii) redistribution of income
(i) reallocation of resources
(ii) price stability
(iii) redistribution of income
Solution:
(c) (ii) only
Explanation: Surplus budget (Government Receipts > Government Expenditure) is adopted to control the rising prices in the economy. It will help to soak the liquidity or money supply in the economy. It will lead to fall in aggregate demand and price level. It has nothing to do with reallocation of resources and redistribution of income.
Explanation: Surplus budget (Government Receipts > Government Expenditure) is adopted to control the rising prices in the economy. It will help to soak the liquidity or money supply in the economy. It will lead to fall in aggregate demand and price level. It has nothing to do with reallocation of resources and redistribution of income.
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