Answer:
Fiscal policy, measures employed by governments to stabilize the economy, specifically by manipulating the levels and allocations of taxes and government expenditures. Fiscal measures are frequently used in tandem with monetary policy to achieve certain goals
The usual goals of both fiscal and monetary policy are to achieve or maintain full employment, to achieve or maintain a high rate of economic growth, and to stabilize prices and wages. The establishment of these ends as proper goals of governmental economic policy and the development of tools with which to achieve them are products of the 20th century.
In taxes and expenditures, fiscal policy has for its field of action matters that are within government’s immediate control. The consequences of such actions are generally predictable: a decrease in personal taxation, for example, will lead to an increase in consumption, which will in turn have a stimulating effect on the economy. Similarly, a reduction in the tax burden on the corporate sector will stimulate investment. Steps taken to increase government spending by public works have a similar expansionary effect. Conversely, a reduction in government expenditure or an increase in tax revenues, without compensatory action, has the effect of contracting the economy.
