What are the main objectives of fiscal policy?

The main objectives of fiscal policy are to promote economic stability, achieve full employment, control inflation, and promote economic growth.

1. Economic Stability: Fiscal policy aims to stabilize the economy by managing aggregate demand. During periods of recession or economic downturn, the government can use expansionary fiscal policy, such as increasing government spending or reducing taxes, to stimulate economic activity and increase aggregate demand. Conversely, during periods of inflation or economic overheating, contractionary fiscal policy, such as reducing government spending or increasing taxes, can help to cool down the economy and reduce inflationary pressures.

2. Full Employment: Fiscal policy also aims to achieve full employment, which means that all individuals who are willing and able to work can find employment. By implementing expansionary fiscal measures, such as increasing government spending on infrastructure projects or providing tax incentives to businesses, the government can stimulate job creation and reduce unemployment rates.

3. Inflation Control: Another objective of fiscal policy is to control inflation, which refers to a sustained increase in the general price level of goods and services. Through contractionary fiscal measures, such as reducing government spending or increasing taxes, the government can reduce aggregate demand and prevent excessive inflationary pressures in the economy.

4. Economic Growth: Fiscal policy plays a crucial role in promoting long-term economic growth. By investing in infrastructure, education, research and development, and other productive sectors, the government can enhance the economy's productive capacity and stimulate economic growth. Additionally, fiscal policy can also be used to incentivize private sector investment and innovation through tax incentives or subsidies.

Overall, the main objectives of fiscal policy are to maintain economic stability, achieve full employment, control inflation, and promote sustainable economic growth. These objectives are pursued through various fiscal measures, such as government spending, taxation, and borrowing.