Learn about the main objectives of fiscal policy and how they impact the economy. Fiscal Policy is the exercise of the government’s control over public spending and other collections for achieving the objectives of general economic policy.
The collected funds are considered by the government as income and then used as expenditure through programs created by the government. The programs created by the government aim to be able to produce achievements on national income, production and economy and are also used as a balancing tool in the economy of the country or kingdom.
10 Key Objectives of Fiscal Policy;How These Objectives Shape Economic Stability.
The main objective of fiscal policy is to determine the direction, goals, targets and priorities of national development and economic growth of a country and its people.
- Encourage the pace of investment in both the state and private sectors.
- Encouraging employment opportunities through state funds issued for incentives to companies.
- Encouraging economic stability amidst global instability through export and import tax regulation measures.
- Encourage socially optimal investment so as to spur the rate of capital formation.
- Encourage the distribution of national income so that economic development in a country can be evenly distributed.
1. Increase GDP (national GDP and GDP per capita)
The main purpose of the government in releasing various fiscal policies is to intervene in the economy so that it can be boosted. Fiscal policy will affect various economic lines, so that every time the government makes changes or updates to fiscal policy, it is expected to be able to stimulate the growth of various sectors.
2.Increase labor absorption
As explained earlier, fiscal policy will affect the economic conditions of a country. When the fiscal policy issued is the right step, it will help boost the economy.
As the economy develops, the industrial sector and the business world also develop, the labor market will also be boosted. The more the domestic economy grows, the more the need for labor from the labor-intensive sector will increase, therefore fiscal policy will also affect the condition of the workforce.
For example, the government’s policy to encourage foreign investment into Indonesia will help the growth of the industrial sector to be higher. The industrial sector is growing rapidly, new factories are being built so that companies need more workers.
Maintain price stability
The government can also intervene in the economy, especially in the price conditions of goods in the market. Inflation has three components, namely core inflation, volatile price inflation and government-regulated price inflation.
Changes in the prices of goods in the market that are influenced by changes in demand and supply are called core inflation. Changes in the prices of goods due to the influence of the season, for example the expensive price of chili in a certain month due to the dry or rainy season, are called volatile price inflation.
Other Objectives of Fiscal Policy.
In addition to the main objectives of fiscal policy, there are several other objectives that Grameds know. What are the other objectives of fiscal policy?
- Fiscal policy aims to achieve stability in the economic conditions of a country nationally.
- Fiscal policy aims to spur a country’s economic growth.
- Fiscal policy can help boost the pace of investment.
- Fiscal policy aims to open up wider employment opportunities.
- Fiscal policy aims to realize the social justice that every country wants to achieve.
- Fiscal policy is also a form of equalization and distribution of income.
- Fiscal policy can reduce unemployment.
- Fiscal policy aims to maintain the stability or stability of prices of goods and services, thereby avoiding inflation.
Those are the eight objectives of fiscal policy that Grameds need to know. After knowing the definition and objectives of fiscal policy, Grameds then needs to know the function of fiscal policy. Here is an explanation of the function of fiscal policy.