What Is Stabilization Policy?

A government’s or central bank’s stabilization policy is a plan aimed at maintaining a healthy level of economic growth and minimum price fluctuations. Maintaining a stabilization strategy necessitates keeping an eye on the business cycle and modifying fiscal and monetary policy as needed to keep sudden shifts in demand and supply under control. A stabilization policy, in the jargon of the business, is intended to keep the economy from “overheating” or “slowing down” too much.