Stabilization policies

Stabilization policies are measures governments take to keep the economy steady and healthy. They aim to reduce fluctuations like high unemployment, inflation, or recession. There are two main types: monetary policy, which involves managing interest rates and money supply (usually by a country's central bank), and fiscal policy, which uses government spending and taxation. For example, during a slowdown, a government might boost spending or cut taxes to stimulate growth. Conversely, to control inflation, it might raise interest rates or reduce spending. These policies help maintain consistent economic growth and stability.