● Revenue expenditure is the expenditure that neither creates any assets or reduces any liability.
● Capital expenditure is the expenditure that either creates assets or reduces liability.
● Taxes and government expenditure can be used to influence the distribution of income.
● The government can impose a higher level of tax on the richer sections of the society and on the goods consumed by them.
● The money collected can be used to give free goods and services to the poorer sections of society.
● This will help to reduce the disposable income of the rich and increase the same of the poor.
● Thus, the distribution of income can be altered.
● A direct tax is the tax whose liability to pay and incidence lies on the same person on whom it is levied.
● Indirect tax is the tax whose liability to pay and incidence lie on different persons.
● The government budget can influence the allocation of resources for the production of different goods and services through its budget.
● If the government wants more resources should be used to produce some specific good, it gives incentives to the producers such as tax reduction or subsidy.
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