Definition of Fiscal Policy





What does the term "fiscal policy" mean? What is meant by the term "fiscal policy"?

Fiscal policy is the way in which a government will influence the economy through taxation and expenditures.

For instance, a government may choose to cut taxes in order to kickstart an economy.

What is Fiscal Policy? - Finance DictionaryOr, in another instance, a government may choose to dramatically increase spending (on infrastructure projects, for instance) to help a country through dire economic times. This increase in spending may result in increased deficits.

The ultimate goal is a government is to have an economy that produces manageable inflation, full employment and economic growth. In order to produce these conditions, a government will modify fiscal policy as they see fit. One side may advocate higher spending coupled with higher taxes, while another side may advocate lower spending coupled with lower taxes.




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