According to the functional finance budget philosophy,
A)deficits should never be used to stimulate the economy
B)automatic stabilizers should be eliminated
C)the government budget should be whatever is necessary to have the economy operate at potential GDP
D)each government spending program should be financed on the basis of its function
E)the federal budget should be balanced in the long run

Question

Quizplus · Accepted Answer

According to the functional finance budget philosophy, the government budget should be whatever is necessary to have the economy operate at potential GDP. This means that deficits can be used to stimulate the economy when necessary, and automatic stabilizers (such as unemployment insurance) should be kept in place to help stabilize the economy during economic downturns. This philosophy emphasizes the importance of achieving full employment and keeping the economy stable, rather than focusing solely on balancing the budget.

According to the Functional Finance Budget Philosophy