The classical economists were of the view that the economy
automatically moves towards full employment in the long run. They ruled out the
possibility of over production and hence unemployment in the long
period. The role of the government in the economy, according to the classical
economists, should be the minimal.
The government uses various fiscal principles/tools in order to achieve rapid economic
growth. The main tools of fiscal policy are grouped under two main heads:
Fiscal policy also called budgetary policy is a powerful instrument in the
hands of the government to intervene in the economy. Fiscal policy relates to a
variety of measures which are broadly classified, as: (a) taxation, (b) public
expenditure and (c) public borrowing.