What is the overall aim of fiscal policy in an economy?

The overall aim of fiscal policy in an economy is to manage tax revenues and government spending. When a government implements fiscal policy, it uses its ability to alter tax rates and adjust spending levels in order to influence economic activity. This can involve increasing or decreasing public spending and adjusting tax policies to either stimulate growth during a recession or cool down an overheating economy.

Effective fiscal policy can help achieve multiple economic objectives, such as promoting full employment, stabilizing prices, and fostering economic growth. By managing the levels of taxation and government expenditure, fiscal policy directly impacts aggregate demand, secondarily influencing overall economic performance.

In contrast, regulating interest rates is the primary role of monetary policy rather than fiscal policy. While controlling inflation rates can be an outcome of effective fiscal policy, the primary aim is broader and includes the management of overall fiscal balances. Likewise, ensuring steady population growth is not a direct objective of fiscal policy, as this scope falls under demographic and social policies.