Question:
Explain the stabilisation function of the Government Budget.
Explain the stabilisation function of the Government Budget.
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Relate stabilisation policies to inflationary and deflationary gaps in the economy.
Updated On: Jan 30, 2025
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Solution and Explanation
The stabilisation function aims to maintain economic stability by managing fluctuations in the economy.
- During inflation: The government reduces spending or increases taxes to control demand.
- During recession: The government increases spending or reduces taxes to boost demand and output.
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