The intervention of the government whether to expand demand or reduce it constitutes the __________ function.
Show answer & explanation
Correct answer: C
Explanation
The correct answer is option 3 i.e. stabilisation.
The intervention of the government to either expand or reduce demand constitutes the "stabilisation function". This function involves implementing fiscal and monetary policies to manage economic fluctuations, control inflation, and stabilize economic growth. By adjusting government spending, taxation, and interest rates, the government aims to smooth out economic cycles, prevent excessive booms and busts, and ensure overall economic stability. This intervention is crucial for maintaining balanced and sustainable economic conditions.