In public finance theory, the distribution function of government activity is primarily directed toward correcting market failures such as non-excludable public goods and externalities, whereas the allocation function deals explicitly with adjusting the market-determined division of income and wealth to achieve social equity.
Answer: Answer
Answer
The statement is False. The allocation function is responsible for resource allocation and correcting market failures, while the distribution function is responsible for adjusting income and wealth distribution for social equity.
The statement is false because it reverses the fundamental economic objectives of public finance branches. The allocation function addresses market failures and resource efficiency, while the distribution function addresses income inequality and social fairness.
Step-by-Step Solution
Key Concept
Functions of Public Finance (Allocation vs. Distribution)