Critically explain objective and tools of fiscal policy?
Fiscal policy is the use of government spending and taxation to influence the economy. It is one of the two main tools of macroeconomic policy, the other being monetary policy. The objectives of fiscal policy are to achieve or maintain full employment, to achieve or maintain price stability, to promote economic growth and development, and to reduce poverty and inequality.
The tools of fiscal policy are government spending and taxation. Government spending is the purchase of goods and services by the government. This includes spending on infrastructure, education, health care, and other public services. Taxation is the levying of taxes by the government. This includes income taxes, corporate taxes, and other taxes.
Fiscal policy can be used to achieve the objectives of macroeconomic policy. For example, government spending can be used to increase aggregate demand and promote economic growth. Taxation can be used to reduce inequality and redistribute income. Fiscal policy can also be used to reduce unemployment and inflation.
Fiscal policy is an important tool for governments to influence the economy. It can be used to achieve a variety of objectives, including full employment, price stability, economic growth, and poverty reduction. The tools of fiscal policy are government spending and taxation.