Fiscal policy

Tilcayo Cats original · British Bees · Sources and editorial assessment · Originals retention rule

Fiscal policy is about what a government spends, how it gets the money it spends, and the effects of these on the economy.

Expansionary and contractionary policy

"Increasing government spending is an example of what economists refer to as expansionary fiscal policy." "The goal of expansionary fiscal policy is to expand the economic activity to its full-employment level." The opposite tool is contractionary fiscal policy.

Deficits and surpluses

A budget surplus is when a government's total income is more than its total spending. When spending is more than income, there is a deficit. "Deficits and surpluses are not just a result of active fiscal policy." In a recession, for example, tax receipts fall and unemployment benefits rise without any new decision. These automatic stabilisers meant that people's incomes fell less in later recessions than in the Great Depression.

See also

• Monetary policy
• Economic growth