What Is Fiscal Policy? Meaning & Example
Definition
Fiscal policy is how a government uses spending and taxation to influence the economy. It works alongside monetary policy but is set by governments rather than central banks.
Related terms
Monetary policy refers to central bank actions, such as setting interest rates and managing the money supply, to influence the economy. Tighter policy cools activity, while looser policy supports it.
GDP (Gross Domestic Product)GDP is the total value of goods and services produced in an economy over a period. It is the broadest measure of economic size and growth.
RecessionA recession is a significant, widespread decline in economic activity lasting more than a few months. It often brings rising unemployment and falling business profits.
What is Fiscal Policy?
Fiscal policy is how a government uses spending and taxation to influence the economy. It works alongside monetary policy but is set by governments rather than central banks.
Can you give an example of Fiscal Policy?
Increasing infrastructure spending to support jobs during a downturn is an example of fiscal policy.