A budget philosophy using fiscal policy to achieve the economy's potential GDP, rather than balancing budgets either annually or over the business cycle, is termed _____
A) budget finance.
B) functional finance.
C) crowding out.
D) crowding in.
E) deficit financing.

Question

Quizplus · Accepted Answer

Functional finance is a budget philosophy that uses fiscal policy to achieve the economy's potential GDP rather than focusing solely on balancing budgets. This approach emphasizes the importance of using government spending and taxation to stabilize the economy and maintain full employment, rather than maintaining a balanced budget at all times. Crowding out and crowding in refer to the effects of government borrowing on private investment, while deficit financing refers to the practice of funding government spending through borrowing rather than taxation. Budget finance is not a commonly used term in economics.

A Budget Philosophy Using Fiscal Policy to Achieve the Economy's