What is the purpose of fiscal policy?

The purpose of fiscal policy is to stabilize national prices and the money supply. This is achieved through government spending and taxation decisions that influence economic activity. Fiscal policy aims to manage economic fluctuations by either stimulating growth during downturns or cooling the economy during periods of excessive expansion. By adjusting tax rates and changing government spending, the government can impact overall demand in the economy, which in turn affects the level of prices and inflation.

This approach helps in maintaining a balanced economic environment and aims to ensure that resources are allocated efficiently while also achieving broader economic goals such as full employment and stable prices. The other options relate to aspects of business operations or strategic management but do not encompass the primary aims of fiscal policy in the broader economic context.