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 finance.

Question

Quizplus · Accepted Answer

Functional finance emphasizes using fiscal policy to achieve the economy's maximum potential output, rather than focusing on balancing budgets annually or over the business cycle. This philosophy allows for deficit spending when necessary to stimulate economic growth and create jobs. Crowding out and crowding in refer to the effect of government borrowing on private investment, and deficit finance refers to financing government spending through borrowing rather than taxing. Budget finance is not a commonly used term in economics.

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