Fiscal Policy, tax rates and spending

Fiscal policy is the process through which the government allocates the revenues it collects to various uses, and adjusts its tax rates and spending to facilitate the growth of the country’s economy. The use of government revenues and expenditure to influence the performance of the economy began after the Great Depression when the United States government realized that it had to intervene in order to resuscitate the economy. When well executed, a fiscal policy leads to reduced inflation and higher employment levels.