Describe the Promoting stability

Question

Describe the Promoting stability?

Answer 1

1. An economy’s level of output is dependent on its level of total spending relative to its productive capacity.

2. The government may promote macroeconomic stability through changes in government spending and taxation.

a. When total spending is too low, the government may increase its spending and/or lower taxes to reduce unemployment.

b. When total spending is excessive, the government may cut its spending and/or raise taxes to foster price stability.