What is the main goal of fiscal policy?

The main goal of fiscal policy is to stabilize the economy through taxes and spending. Fiscal policy involves government decisions about how to influence the economy by adjusting its levels of spending and taxation. When a government increases spending or decreases taxes, it can stimulate economic activity, helping to pull an economy out of recession or soften the impacts of economic downturns. Conversely, by reducing spending or increasing taxes, the government can cool down an overheating economy and help control inflation.

This approach allows policymakers to influence economic growth, control unemployment levels, and manage inflation, thus maintaining overall economic stability. Stabilizing the economy is essential for long-term growth and providing a predictable environment for businesses and consumers.

The other options relate to important economic concepts but do not encapsulate the primary aim of fiscal policy. For instance, managing the federal budget deficit is one aspect that can result from fiscal policy decisions, but it is not the overarching goal. Regulating the money supply pertains more to monetary policy, which is managed by a central bank. Increasing international trade is also a vital economic goal but falls outside the direct objectives of fiscal policy.