Government plays a role in macroeconomic stabilization from "summary" of Principles of Macroeconomics by N. Gregory Mankiw
In the study of macroeconomics, one important concept is the role that government plays in stabilizing the economy. When the economy is facing challenges such as high unemployment or inflation, the government can use various tools to help stabilize the economy.
One way the government can influence the economy is through fiscal policy, which involves changing government spending and taxes. For example, during a recession when unemployment is high, the government can increase its spending on public projects to create jobs and stimulate economic activity. On the other hand, during times of high inflation, the government can decrease spending to reduce demand and curb rising prices.
Another tool the government can use is monetary policy,...
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