The stabilisation function of the government budget mainly includes.

The correct answer is intervention to expand or reduce the demand.

Key Points

• Stabilisation function:-
  • It is aimed at maintaining economic stability by adjusting the level of aggregate demand in the economy.
  • The stabilization function of the government budget is a macroeconomic concept that deals with the management of the overall level of economic activity in the economy. 

Additional Information

• Fiscal policy tools:-
  • These are used by the government to influence the level of aggregate demand in the economy. Expansionary fiscal policy involves increasing government spending, reducing taxes, and increasing borrowing to stimulate economic growth. In contrast, contractionary fiscal policy involves reducing government spending, increasing taxes, and reducing borrowing to slow down economic growth.
• Allocation of resources:-
  • It is an important function of the government, which involves the distribution of resources among different sectors of the economy to achieve economic efficiency and equity.
• Production of public goods:-
  • It is another important function of the government, which involves the provision of goods and services that are not provided by the private sector, such as national defense, public health, and education.
• Distribution of income in society:-
  • It is an important issue that involves the fair distribution of income among different groups in the economy. The government can use taxation and social welfare programs to achieve a fair distribution of income.