LeoGlossary: Fiscal Policy

Fiscal Policy is the seeking of economic stability through the use of government taxation and expenditures. This is in contrast to Monetary Policy which is controlled by the Central Bank.

Often the two are used in conjunction with each other.

The goal of both is to maintain price stability, high economic growth, and achieve full employment. In this era, fiscal policy usually means deficit spending since governments tend to spend more than they receive through taxation.

Fiscal policy is focused upon what is within the government's control. By adjusting taxation, as an example, the theory holds that spending will increase since people have more money at their disposal.

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