The goal of fiscal policy is to promote economic growth and stability. Fiscal policy is the use of government spending and taxation to influence the economy. The government can use fiscal policy to stimulate the economy during a recession or to slow down the economy during a period of high inflation.
There are two main types of fiscal policy: expansionary and contractionary. Expansionary fiscal policy is used to stimulate the economy. The government increases spending or cuts taxes to increase aggregate demand. This can lead to increased economic growth and employment.
Contractionary fiscal policy is used to slow down the economy. The government decreases spending or raises taxes to decrease aggregate demand. This can lead to decreased economic growth and inflation.
Fiscal policy is an important tool that the government can use to manage the economy. It is important to use fiscal policy wisely to avoid creating economic instability.
- Option 1: Promote economic growth and stability. This is the correct answer. Fiscal policy is used to stimulate the economy during a recession or to slow down the economy during a period of high inflation.
- Option 2: Increase social inequality. Fiscal policy can have an impact on social inequality, but this is not its primary goal.
- Option 3: Neglect public services. Fiscal policy can be used to fund public services, but this is not its primary goal.
- Option 4: Discourage investments. Fiscal policy can be used to discourage investments, but this is not its primary goal.