Which of the Following Is Most Representative of the Functional

question 68

Multiple Choice

Which of the following is most representative of the functional finance view of the macroeconomy?

• A)The economy is self-regulating and the best thing the government can do to enhance stability is to stay out of the way.
• B)Budgets should be balanced. Doing otherwise is morally wrong.
• C)The government should decide on tax and spending plans based on their effects on the economy.
• D)Crowding out almost completely cancels out any deficit spending, so fiscal policy is likely to be ineffective.

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Definitions:

Equilibrium Levels

The state in which market supply and demand balance each other, and as a result, prices become stable.

Ticket Prices

The cost charged for admission to an event or access to a service.

Price Ceilings

Government-imposed limits on the maximum prices that can be charged for certain goods and services, intended to protect consumers.

Ration Coupons

Certificates or vouchers that allow the holder to purchase a certain amount of scarce goods, often used during shortages to ensure fair distribution.