Question:medium

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 13, 2026
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Solution and Explanation

The stabilization function's objective is to ensure economic stability by addressing economic variations.
- In inflationary periods: The government curtails expenditure or raises taxes to temper demand. 
- During economic downturns: The government expands spending or lowers taxes to stimulate demand and production.

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