Question

Which of the following is most representative of the functional finance view of the macroeconomy? The economy is self-regulating and the best thing the government can do to enhance stability is to stay out of the way. Budgets should be balanced. Doing otherwise is morally wrong. The government should decide on tax and spending plans based on their effects on the economy. Crowding out almost completely cancels out any deficit spending, so fiscal policy is likely to be ineffective.

Answer 1

The government should decide on tax and spending plans based on their effects on the economy.

Step-by-step explanation:

According to the functional finance theory, the government is the authority which should finance itself to come along to meet with the explicit goals of the economy of the country. The theory has been proposed by Abba P. Lerner. Some of the goals of the economy include attainment of full employment, decreasing the rate of inflation and ensuring growth.