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According to Stiglitz, because efficient market allocations cannot be attained without government intervention, the proper economic role of the government is as follows: 1) the government should be wary both of exercising its monopoly power and granting monopoly rights (franchises); 2) the government should encourage competition within the ...
evolution of the stabilization function of government: How this function was started and theorized as a necessary addition to the allocation and distribution functions and why scal policy is always necessary besides monetary policy.
Stabilization. The objective of stabilization policy is to avoid and if necessary correct domestic and external imbalances that threaten disruption to the economy in the short term.
“The Stabilization Function of Government” Relevant Readings from the Required Textbooks: • Chapter 7, Gross Domestic Product and Economic Growth • Chapter 8, Impact of Policy Decisions on the Rate of Inflation. Definitions and Concepts: • stabilization function – attempts by government to minimize fluctuations in overall
policy and government purchases of goods and services. Like private con-sumption goods, government purchases yield utility to households. Private and public consumption are not, however, perfect substitutes. Our goal is to examine the optimal use of the tools of monetary and fiscal policy when
stabilization policies would have widely different effects on subnational regions depending on the industry structure, economic diversity, and trend growth rate in the region.
Covering the period from 1946 through 2008 in the United States, it provides details on the methods and results of empirical tests of the effects of budget stabilization instruments on government operations, public service provision, and some other aspects of social and economic life.
