How does fiscal policy work?

Depending on the needs of the economy, Congress and the Treasury may tweak spending programs or raise or lower tax rates to direct funds to different areas in the budget. Fiscal policy rests on a government’s decision to spend more or less than it receives in revenue.

What is the difference between fiscal policy and monetary policy?

Fiscal policy is often contrasted with monetary policy, which is enacted by central bankers and not elected government officials. Fiscal policy refers to the use of government spending and tax policies to influence economic conditions. Fiscal policy is largely based on ideas from British economist John Maynard Keynes.

How does fiscal policy affect macroeconomic conditions?

Fiscal policy uses government spending and tax policies to influence macroeconomic conditions, including aggregate demand, employment, and inflation.