The economy
Fiscal policy
Government decisions on taxation and spending, and their effect on the economy.
How it works
Fiscal policy works alongside monetary policy. Spending increases and tax cuts support demand; the reverse restrains it.
Government borrowing to fund deficits also affects bond markets directly, by changing how much debt has to be absorbed.
Related terms
- Central bankThe institution that sets a country’s benchmark interest rate and manages its money supply.
- Gross domestic productThe total value of goods and services an economy produces in a period.
- Yield curveA chart of government bond yields across maturities, from months to decades.
- InflationThe rate at which prices rise, which means the rate at which each pound or dollar buys less.
More in The economy
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