Question

State two objectives of fiscal policy.

Explain various objectives of fiscal policy.

What are the objectives of fiscal policy?

Give various objectives of fiscal policy.

Discuss various objectives of fiscal policy.

Answer 1

1. Raising Revenues: In order to meet the state expenditure for carrying out its functions, the government levy taxes of different types so that its revenue may increase.
2. Economic Growth: Economic growth is nothing, but an increase in the economic activities or economic variables over a period of time along with reduction in poverty, unemployment and income inequalities.
   Economic growth enables a country to produce more goods and services and thereby help in raising the standard of living of the people. Moreover, high rate of economic growth helps in solving the problems of poverty and unemployment in developing countries like India.

Answer 2

1. Economic Stability: Achieving economic stability is one of the primary goals of fiscal policy in developed nations. When economic activity is kept constant, output and employment don't fluctuate, which is known as economic stability. Eliminating cyclical variations in the level of economic activity is necessary for economic stability. Business cycles are a common occurrence in market economies. Business cycles are defined as periods of alternating booms and recessions in the amount of output and employment. 
2. To Achieve Full Employment: It is believed that one of the main goals of economic policy is full employment. When everyone who wants to work at the current wage rate can find employment, this is referred to as full employment. When there is no involuntary unemployment, there is full employment. Nonetheless, some employees are constantly switching jobs; they are out of employment for a long. We call this “frictional unemployment”.
3. Economic Growth: Achieving a high rate of economic growth is one of the main goals of economic policy in developing nations. Economic growth is commonly understood to be the process through which a nation's actual per capita income rises over an extended period of time. Economic growth raises the standard of living for people by allowing the economy to create more commodities and services.
4. Price Stability: Achieving price stability is another goal of fiscal policy in developing nations. Due to the high levels of overall economic spending in these nations without a commensurate gain in production in the early stages of economic development, prices have a propensity to rise. Controlling the price increase is therefore necessary.
5. Reducing Inequalities in Income and Wealth: The goal of developing nations is to lessen disparities in wealth and income distribution. Significant disparities in wealth and income exist in these nations. A tiny percentage of people enjoy luxury, while the majority of people work extremely hard to make ends meet. Gross inequality is a social disease, and economic growth alone won't improve economic well-being unless these gains are distributed among all members of the economy.
6. Attaining External Equilibrium: The achievement of external equilibrium, or balance of payments equilibrium, is a key goal of fiscal policy. As far as practicable, imports and exports should be equal for the balance of payments to be in equilibrium. In particular, we should avoid a balance of payments deficit – that is, an excess of imports over exports.

Answer 3

The main objectives of fiscal policy are:

1. full employment
2. price stability
3. accelerating the rate of economic development
4. optimum allocation of resources
5. equitable distribution of income and wealth
6. economic stability
7. capital formation
8. encouraging investment