Series 65: Fiscal Policy

Fiscal Policy

In addition to monetary policy, the government can also use fiscal policy to influence the direction of the economy. Fiscal policy is enacted by either the president or Congress, through legislation, to alter either taxes or government spending. During a recession, the federal government may try to stimulate the economy through a fiscal policy that increases consumer spending. Such an expansionary fiscal policy may include either lowering taxes to give consumers more money or increasing government spending to provide more job growth and services, which also put more spending money in consumers’ pockets. Some examples of government spending that meet this goal are increasing unemployment insuranc