Economics Fiscal Policy Questions
The role of fiscal policy in promoting economic stability is to use government spending and taxation to influence the overall level of economic activity. During times of economic downturn, fiscal policy can be used to stimulate the economy by increasing government spending and reducing taxes, which encourages consumer and business spending. Conversely, during times of inflation or economic overheating, fiscal policy can be used to cool down the economy by reducing government spending and increasing taxes, which reduces overall demand and helps to control inflation. By adjusting fiscal policy, governments can help stabilize the economy and promote sustainable economic growth.