Stabilization Policy

Stabilization policy refers to government actions aimed at maintaining a healthy economy by reducing fluctuations like inflation, unemployment, and economic growth. There are two main types: fiscal policy, which involves adjusting government spending and taxes, and monetary policy, managed by the central bank through interest rates and money supply. These policies aim to boost economic activity during downturns and cool it down when it's overheated, promoting steady growth, low inflation, and stable employment.