Fiscal policy refers to the use of government taxing, spending, and borrowing decisions to influence economic activity. By increasing or decreasing public expenditures and adjusting tax rates, governments attempt to stimulate growth, restrain inflation, redistribute income, or stabilize the business cycle. Unlike monetary policy, which is conducted by a central bank, fiscal policy is set by legislatures and executive authorities and directly impacts budget deficits, public debt, and long-term economic sustainability.
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