The correct answer is: a) Maintaining fiscal deficit within limits.
Fiscal policy is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy. In particular, it seeks to achieve macroeconomic objectives such as stable prices, full employment, and economic growth.
One of the key principles of fiscal policy is to maintain a fiscal deficit within limits. A fiscal deficit occurs when the government spends more money than it collects in taxes. This can be a problem because it can lead to higher levels of debt and inflation.
There are a number of reasons why it is important to maintain a fiscal deficit within limits. First, a large fiscal deficit can lead to higher levels of debt. When the government spends more money than it collects in taxes, it has to borrow money to make up the difference. This can lead to a large national debt, which can be a burden on future generations.
Second, a large fiscal deficit can lead to higher levels of inflation. When the government spends more money, it puts more money into circulation. This can lead to an increase in the demand for goods and services, which can push up prices.
Third, a large fiscal deficit can lead to a decrease in economic growth. When the government spends more money, it takes resources away from the private sector. This can reduce investment and innovation, which can slow down economic growth.
For these reasons, it is important to maintain a fiscal deficit within limits. The government should try to balance its budget or run a small surplus. This will help to keep the national debt under control, inflation low, and economic growth high.
The other options are not key principles of fiscal policy.
Option b, prioritizing revenue expenditure, is not a key principle of fiscal policy. Revenue expenditure is the spending that the government does on things like salaries, pensions, and interest payments. It is important to prioritize revenue expenditure, but it is not a key principle of fiscal policy.
Option c, avoiding market borrowings, is not a key principle of fiscal policy. The government can borrow money from the market to finance its spending. This is not a problem as long as the government can afford to repay the debt.
Option d, increasing tax rates, is not a key principle of fiscal policy. The government can increase tax rates to raise revenue. However, this can have a negative impact on the economy, as it can discourage investment and innovation.