Developmental functions Developmental functions include maintenance of high and steady rate of growth of real national income , avoidance of inflation and compensatory or functional finance policies. Lord Keynes in his General Theory (1936) has made it clear that a free enterprise economy is subject to periodic fluctuations and instability. Hence the undertaking of large-scale public expenditure to maintain high levels of effective demand, output and employment is required. Again a free market economy has a strong tendency towards a biased distribution of national income; more in the favor of the richer sections of society. This needs to be corrected through progressive taxation measures in order to promote social welfare. Finally, the experience of the two menacing wars has led the nations to undertake large-scale defense expenditure and to organize technically superior defense systems. Again maintenance of high levels of effective demand and employment is only a short-term goal. In the long run, it assumes the form of steady growth rates of the
This is the end of the preview. Sign up
access the rest of the document.
This note was uploaded on 11/17/2011 for the course EC ec 201 taught by Professor - during the Fall '10 term at Montgomery.