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What does fiscal policy refer to?

What is 'Fiscal Policy'. Fiscal policy refers to the use of government spending and tax policies to influence macroeconomic conditions, including aggregate demand, employment, inflation and economic growth.

What is the purpose of fiscal policy?

The objective of fiscal policy is to maintain the condition of full employment, economic stability and to stabilize the rate of growth. For an under-developed economy, the main purpose of fiscal policy is to accelerate the rate of capital formation and investment.

What are the 3 tools of fiscal policy?

The three main tools of monetary policy used by the Federal Reserve are open-market operations, the discount rate and the reserve requirements. Through the use of these three tools, the Fed can manipulate market movements to exercise control over the economy.

What are the types of fiscal policies?

Types of fiscal policy. There are two main types of fiscal policy: expansionary and contractionary. Expansionary fiscal policy, designed to stimulate the economy, is most often used during a recession, times of high unemployment or other low periods of the business cycle.

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