Which of the following best describes the goal of fiscal policy?

The goal of fiscal policy primarily focuses on using government spending and taxation to influence the economy. This encompasses managing aggregate demand to achieve economic stability, which includes addressing issues like inflation, unemployment, and economic growth. By adjusting spending and taxation levels, fiscal policy aims not only to stabilize the economy but also to allocate resources efficiently, ensuring that they are utilized in ways that promote overall welfare.

Achieving economic stability involves countercyclical measures, such as increasing government spending during a recession to stimulate demand or decreasing it during booms to cool down an overheating economy. This strategic manipulation is key to fostering a balanced economic environment, making option B the most accurate reflection of the goal of fiscal policy.