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What is Fiscal Policy?

Fiscal Policy refers to the tactics used by a central government to influence the nation’s economy, whether by setting tax and/or spending policies.

Fiscal policy is related to monetary policy, in that they are both aimed to either boost an economy or temper growth to avoid overheating. A fiscal policy conducive to growth would aim to have low taxes and higher level of spending.

When a government invokes “austerity” measures, it means they are trying to cut spending most likely to reel-in budget deficits or overall debt levels.

Keywords: monetary policy, debt, taxes, fiscal policy,