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Government Budget and Economy — Economics STD 12 Humanities & Commerce — Question

Rajasthan BoardEnglish MediumSTD 12 Humanities & CommerceEconomicsGovernment Budget and Economy4 Marks
Question
Explain how government budget can be helpful in bringing economic stabilisation in the economy.
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Answer

Economic stability means stability of prices. Too much fluctuation in prices is not good for the economy. Government uses taxation policy and expenditure policy in controlling the prices. For example in an inflationary situation, government can reduce its expenditure and this would reduce aggregate demand. During deflationary situation, government can reduce taxes and increase its expenditure.

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