Government Policy for Sustaining Economic Stability and Enhancing Social Welfare

Abstract

Conventional fiscal policy plays a crucial role in maintaining economic stability through the management of taxation and government expenditure. However, the implementation of such policy faces various challenges, including timing of execution, fiscal constraints, political pressures, and the effects of economic globalization. This study reviews both empirical and theoretical literature concerning the relationship between fiscal policy, societal welfare, and economic growth. Findings indicate that expansionary fiscal policy can enhance household purchasing power and public investment, yet it may generate budget deficits and inflation if not managed properly. Conversely, contractionary fiscal policy can curb inflation but risks slowing economic growth and exacerbating social inequality. Therefore, the effectiveness of conventional fiscal policy largely depends on careful policy design, fiscal transparency, and alignment with monetary policy measures. Policymakers are encouraged to adopt evidence-based strategies and ensure accountability to optimize the dual objectives of economic stabilization and equitable welfare distribution. This review underscores the importance of adaptive and well-coordinated fiscal measures to navigate contemporary economic challenges.