Fiscal Policy (Economics Term)
Federal government policies with respect to taxes and spending that affect the level, composition, and distribution of national income and output. The budget process is a major vehicle for determining and implementing federal fiscal policy. Many summary indicators of fiscal policy exist. Some, such as the budget surplus or deficit, are narrowly budgetary. Others attempt to reflect aspects of how fiscal policy affects the economy.
Definition of Fiscal Policy and Monetary Policy
Fiscal Policy: Federal government policies with respect to taxes, spending, and debt management intended to promote the nations’ macroeconomic goals, particularly with respect to employment, gross national product, price level stability, and equilibrium in balance of payments. The budget process is a major vehicle for determining and implementing Federal fiscal policy. The other major component of Federal macroeconomic policy is monetary policy. (See Monetary Policy.)
* * * * * * *
Monetary Policy: Management of the money supply, under the direction of the Board of Governors of the Federal Reserve system, with the aim of achieving price stability and full employment. Government actions in guiding monetary policy, include currency revaluation, credit contradiction or expansion, rediscount policy, regulation of bank reserves and the purchase and sale of Government securities. (See Fiscal Policy.)
[The Congressional Budget Process: An Explanation, Appendix J (Glossary), Committee on the Budget of the U.S. Senate, S. Prt. 105-67 (Revised December 1998).]