The use of public finance and financial transactions to achieve desired economic goals. Taxing and spending power are used along with monetary policy to arrest and reverse declines in business activity.
By cutting taxes, more money is left in the hands of consumers and businessmen which increases their spendable income. The government can act more directly on the economy by increasing purchases from the private sector and by pursuing public works projects.
Taken together, tax cuts, increased government spending and “easy money” provide powerful and effective stimulation to the economy.
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