In economics and political science, fiscal policy is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy. The two main instruments of fiscal policy are government taxation and expenditure. Changes in the level and composition of taxation and government spending can affect the following variables in the economy:
- Aggregate demand and the level of economic activity;
- The pattern of resource allocation;
- The distribution of income.
Fiscal policy refers to the use of the government budget to influence economic activity.
Read more about Fiscal Policy: Stances of Fiscal Policy, Economic Effects of Fiscal Policy, Fiscal Straitjacket
Famous quotes containing the word policy:
“Our policy is directed not against any country or doctrine, but against hunger, poverty, desperation and chaos. Its purpose should be the revival of a working economy in the world so as to permit the emergence of political and social conditions in which free institutions can exist.”
—George Marshall (1880–1959)