Fiscal policy

What fiscal policy means in economics, with an example and a question to test yourself.

Definition

Fiscal policy: Fiscal policy is the use of government spending and tax policy to influence the path of the economy over time.
Not to be confused with: Monetary policy: Monetary policy is a central bank's management of interest rates and credit conditions to influence the level of economic activity.

Test yourself

What is the difference between fiscal policy and monetary policy?

Learn it properly: the module