Скачать или смотреть Objectives of Fiscal Policy | Ecoholics

The economy harbors a fire that, if not controlled, can destroy everything, and that is fiscal deficit. It occurs when the government's revenue is less than its expenditures, meaning when the government spends more than it earns. Fiscal policy is the tool used to regulate this.

It is considered the most powerful tool in the economy, much like the relationship between monetary policy and the central bank (RBI), fiscal policy is closely linked to the government. The Finance Ministry develops and maintains fiscal policy.

The use of fiscal policy is aimed at enhancing economic growth. In this, the government reduces taxes to increase spending, leading to a boost in production and economic growth. In situations of inflation, taxes are increased to reduce spending, thereby promoting price stability.

When the government increases its spending, job opportunities rise, effectively addressing unemployment (Full employment). Fiscal policy is also utilized for income redistribution, reducing income inequality.

To implement fiscal policy, the government has two tools: taxation and government spending.

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