Policy Should Create an Environment in Which the Economy Can

question 97

Multiple Choice

Policy should create an environment in which the economy can expand its productive capacity rapidly, because that is the ultimate source of higher living standards.This task is the realm of

• A)growth policy.
• B)stabilization policy.
• C)labor policy.
• D)inflation policy.

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Definitions:

Functional Finance

An economic theory that prioritizes achieving full employment and stable prices over balancing budgets.

Potential GDP

The maximum output an economy can produce without causing inflation, when operating at full employment.

Government Budget

A financial statement presenting the government's proposed revenues and spending for a fiscal period, reflecting policy priorities and economic goals.

Annually Balanced Budget

A fiscal policy goal where government revenues and expenditures are equal within a one-year period, preventing deficit or surplus.