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the stabilization function that had long been assumed to be exercised solely by the central government was extended to the subnational level and how state governments in the USA experimented with their scal practices.
“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
results suggest that the stabilization capacity of a federal budget can be maximized by linking the (higher) mobility of capital (through the revenue side) to the (lower) mobility of labor (on the expenditure side). KEYWORDS: Monetary Union; Macroeconomic Stabilization; Fiscal Policy; Monetary Policy JEL CLASSIFICATIONS: E63; F36; F41; F45
stabilization policies would have widely different effects on subnational regions depending on the industry structure, economic diversity, and trend growth rate in the region.
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 subnational governments was a topic of considerable research prior to 1970.1 Very rapid growth of state and local government expenditures in the years following World War II and lingering concerns about the causal role of state and local...
Second, we add government investment spending to the base-line model. We show that all government expenditure follows classical principles when monetary policy is sufficient to stabilize output. More-over, even when monetary policy is limited, the model does not point toward government investment as a particularly useful tool for putting idle
