Fiscal policy.
In plain English
Fiscal policy is the government's use of taxes and spending to influence the economy. When it wants to boost activity, it can cut taxes or spend more, putting money into the economy; when it wants to cool things or shrink deficits, it can raise taxes or spend less. This is set by Congress and the president through the budget, which makes it the counterpart to monetary policy, the interest-rate and money-supply tools run by the Federal Reserve. The two can pull together or against each other.
01Why it matters
Fiscal policy shapes taxes, benefits, and the deficit, so it reaches your paycheck and the broader economy directly, and knowing it is separate from the Fed clarifies who controls which lever.
02The math, step by step
In a downturn, a government might send out tax rebates or fund public projects to lift spending and hiring. In better times, it might let those measures expire or raise taxes to bring the deficit down. Each is fiscal policy: a taxing or spending choice aimed at the economy.
03What this is NOT
It is not what the Federal Reserve does. The Fed runs monetary policy (interest rates, money supply). Fiscal policy is Congress and the president using taxes and spending. Different institutions, different tools, often confused.
04Receipts
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