What is the primary goal of stabilisation policy?

The primary goal of stabilization policy is to achieve full employment. Stabilization policies are implemented by governments and central banks to manage economic fluctuations and maintain a balance in economic activity. This goal is rooted in the desire to create conditions where all individuals who are willing and able to work can find employment. When employment levels are high, consumer spending tends to increase, which in turn can foster economic growth and stability.

Achieving full employment also entails addressing cyclical unemployment, which arises from fluctuations in the economy. By using tools such as fiscal policy (government spending and taxation) and monetary policy (control of interest rates and money supply), stabilization policy aims to smooth out these cycles and maintain a stable economic environment conducive to constant employment.

While limiting government spending, increasing tax revenue, and decreasing inflation are all important economic objectives, they are often considered secondary to the overarching goal of ensuring that the labor force is productively engaged through full employment. Ultimately, a strong workforce contributes to broader economic health, making full employment a central focus of stabilization policies.