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Question

Briefly describe how the government budget contributes to the process of growth and stability. 


Solution

The government budget contributes to growth, because a significant percentage of budgetary expenditure is committed to the growth and expansion of public sector enterprises. The government also offers subsidies to the producers to maintain high level of production of the essential goods. 
Stability is promoted by combating inflation through fiscal discipline and combating deflation through liberal spending by the government. Fiscal discipline aims at lowering AD during inflation. Liberal spending promotes AD during deflation. 

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