Fiscal policy

Fiscal policy includes any measure that the national government takes to influence the economy by budgetary means.

Fiscal policy includes any measure that a government takes to influence the economy by budgetary means, such as increasing or decreasing public spending as well as raising or lowering taxes.

Both fiscal and monetary policy (which is under the jurisdiction of central banks) can be used to influence the economy's short-term performance. Central banks cutting interest rates or governments cutting taxes, for example, might stimulate short-term growth in the economy, while cutting spending and raising taxes (or interest rates) tends to dampen growth.

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