What is fiscal policy?

📘 In Brief Fiscal policy refers to all government measures that influence government spending and taxes (as well as levies) in order to steer overall economic development. The goal is to mitigate economic fluctuations, promote growth, and stabilize employment. In contrast to monetary policy (central bank), fiscal policy operates directly through the government budget – it is the government’s most important economic policy tool. 🔍 Why This Matters Fiscal policy has a direct impact on economic growth, inflation, and the labor market. During recessions, the government can support demand through higher spending or tax cuts (expansionary fiscal policy). During booms, it can curb overheating through spending cuts or tax increases (contractionary fiscal policy). For citizens and businesses, it determines the tax burden, government investment (infrastructure, education), and social security – and thus the overall economic framework within which markets operate. 📈 K …