Question : The intervention of the government whether to expand demand or reduce it constitutes the ___________.
Option 1: speculative function
Option 2: redistribution function
Option 3: stabilisation function
Option 4: transaction function
Correct Answer: stabilisation function
Solution : The correct answer is the stabilisation function .
One of the aims that governments attempt to attain by manipulation of fiscal and monetary policy is economic stabilisation (e.g., full employment, inflation management and an equitable balance of payments). Restriction conditions may be required in such cases to decrease demand. The government's intervention, whether to increase or decrease demand, is the stabilisation function.
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