Explain objective of stability of prices of government budget

Question 2. Explain objective of stability of prices of government budget
Class  Class 12
Subject Economics (Macroeconomics)
Category Class 12 Economics Solutions Sandeep Garg

Sandeep Garg Macroeconomics Class 12 Solutions Circular flow of Income – Short Questions Q.2 Explain objective of stability of prices of government budget
“OR”
Explain the economic stability objective of a government budget.

Solution:-




Government through its budget aims to prevent large scale fluctuations in prices. Such a situation, leads to anxiety and fear in minds of consumers and investors. Prices tend to rise when aggregate demand in the economy is higher than aggregate supply. In such a situation, government decreases its expenditures in order to reduce money supply in the economy which in turn reduces aggregate demand. Prices tend to fall when aggregate supply in the economy is more than aggregate demand in the economy. In such a situation, government increases its expenditures in order to increase money supply in the economy which in turn increases aggregate demand.

Short Questions – Sandeep Garg Macroeconomics Class 12 Solutions Government budget and the Economy

Sandeep Garg Macroeconomics Class 12 Solutions

Part A: Introductory Macroeconomics
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