Goals of fiscal policy are to promote maximum employment, flash
(stabilizing prices), and economic harvest-festival. If economists counter up its possible
to achieve all the goals at once, the goals are inconsistent. There are
limitations to monetary policy.
The term maximum employment means that we should try to hold the
unemployment rate as pocket-sized as possible without pushing it below what
economists call the natural rate or the full- employment rate. Pushing
unemployment below that direct would cause rising prices to rise and thereby ruin
the other objective--stable prices, economic growth, which is our objectives
in the long run.
Overall financial stability will lead to a better balance between consumption
and saving that will cast off resources available for investment purposes, reduce
changes in the economy created by the rising prices in the past, and by the
reactions of savers, as well as bringing up high and sustainable economic
growth; and contribute towards an investor friendly environment that will
attract hostile investors to the country.
Evidence has suggested that economies perform better, in terms of growth,
employment and living standards, in low inflation environments than they do
when inflation is persistently high. This evidence is a coincidence across
countries over long periods. The association between economic performance,
indicates a disconfirming relation; that is, the higher the inflation, the lower the
rate of real growth.
Evidence suggesting that low inflation promotes growth has motivated
recent decisions by a number of central banks and governments, roughly notably
New Zealand. Canada, the United Kingdom and Sweden also have moved in
recent geezerhood to establish monetary policy with official low inflation targets.
Decisions to adopt a policy objective of low inflation suggest that other
policy-makers are reading the evidence pertaining to inflation and growth as
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