Ensuring economic stability:
To restrain inflationary pressures in the economy to ensure economic stability:
The fiscal policy should be employed as an instrument for dealing with inflationary or deflationary conditions. One way to attain this is to devise a tax structure that will automatically counter the economic disturbances as they occur. The second is to make modifications in the tax system in order to deal with inflationary or deflationary conditions. In many countries, it is via the direction of the public expenses instead of taxation that more efficient action can be taken to eradicate the effect of a deflationary spiral. In terms of inflation, anti-inflationary taxes like surplus profit tax and commodity taxes on articles of both general and lavishness consumption can be forced.
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