The intervention of the government, whether to expand demand or reduce it, constitutes the ............... function.

1. Public production
2. Allocation
3. Redistribution
4. Stabilisation

Option 1 -> Public production refers to government directly producing goods and services, not demand management.

Option 2 -> Allocation function deals with resource distribution and provision of public goods.

Option 3 -> Redistribution function involves income and wealth transfer through taxes and subsidies.

Option 4 -> Stabilisation function involves government intervention to manage aggregate demand in the economy.

Hence, Option 4: Stabilisation -> The stabilisation function of government involves intervening in the economy to maintain economic stability by expanding demand during recession (through increased government spending or tax cuts) or reducing demand during inflation (through reduced spending or tax increases). This demand management helps control inflation, unemployment, and economic fluctuations, ensuring stable economic growth -> correct