Fiscal policy

Fiscal policy includes any measure that the national government takes to influence the economy by budgetary means, such as increasing or decreasing public spending and taxes. Both fiscal and monetary policy can be used to influence the economy’s short-term performance.

Low interest rates or taxes, for example, might stimulate short-term growth in the economy, while trimming spending and increasing government revenues via tax rises tends to dampen growth. However, there can be long delays between policy decisions and any visible impact on the economy, and stimulative or restrictive policies can also be self-defeating in the long run if they are applied persistently and indiscriminately.

The government’s job is to combine fiscal and monetary policies in such a way that they will foster steady growth but avoid inflation.

MoneyWeek magazine

Latest issue:

Magazine cover
Heading higher?

Or are house prices set to fall?

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

'Would you rather upset God, or have Him just ignore you?'

In the first of three interviews with Merryn Somerset Webb, Hugh Hendry, manager of the Eclectica Fund, talks about what it takes to be a good hedge fund manager – and how he learned to stop worrying and love central banks.


Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.


21 November 1969: The first permanent Arpanet link

A milestone in the formation of the internet, the first permanent Arpanet link was established on this day in 1969 between researchers in the United States.