Fiscal Policy
Intermediate Level
Global
Macroeconomics
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Definition
Government policy regarding taxation and spending to influence economic conditions.
Detailed Explanation
Fiscal policy is set by the government, unlike monetary policy which is controlled by the central bank. Expansionary fiscal policy involves increased spending or tax cuts; contractionary policy involves reduced spending or tax increases.
Example
During a recession, the government may increase infrastructure spending to create jobs and stimulate the economy.