Question

When governments intervene in the market to expand or reduce the demand, this course of action is ........

• A. Allocative Function
• B. Distribution Function
• C. Stabilization Function
• D. Fiscal Function

Hint:

Stabilization = controlling demand, inflation, and unemployment. Allocative = resource allocation; Distribution = equity.

Answer 1

The Correct Option is C

Step 1: Recall government functions.
- Allocative Function: Proper allocation of resources between private and public goods.
- Distribution Function: Redistribution of income and wealth through taxes and subsidies.
- Stabilization Function: Government intervention to maintain stability in prices, output, and employment.
- Fiscal Function: General role of government in taxation and expenditure.
Step 2: Apply to the question.
The question mentions “expand or reduce demand”, which directly refers to stabilization policies (using fiscal/monetary measures to control aggregate demand).
Final Answer: \[ \boxed{\text{Stabilization Function}} \]