Series 65: 1.2.2 Fiscal Policy

1.2.2  Fiscal Policy

In addition to monetary policy, the government can also use fiscal policy to influence the direction of the economy. Fiscal policy is enacted by federal and state governments, most notably Congress and the president, through legislation, to alter either taxes or government spending. During a recession, the federal government may try to stimulate the economy through a fiscal policy that increases consumer spending. Such an expansionary fiscal policy may include either lowering taxes to give consumers more money or increasing government spending to provide more job growth and services, which also puts more spending money in consumers’ pockets. Some examples of government spending that meet this goal