SSC CHSL 2023 PYQ — Question 35

The correct answer is option 2 i.e. intervention to expand or reduce the demand.

• The government budget's stabilization function focuses on managing aggregate demand. This involves fiscal policy tools like taxation and spending to counteract economic fluctuations. During recessions, governments increase spending or cut taxes to boost demand.
• Conversely, during inflationary periods, they reduce spending or raise taxes to curb demand. This intervention aims to smooth economic cycles, maintain price stability, and achieve full employment. Essentially, it's about using the budget to stabilize the economy.