The use of government spending and taxation to influence the economy. When the government cuts taxes or increases spending, it is using expansionary fiscal policy to stimulate growth. When it raises taxes or cuts spending, it is using contractionary fiscal policy to slow the economy.
During a recession, Congress might pass a law to send $1,200 checks to taxpayers and increase spending on infrastructure projects. This puts more money in people's pockets and creates jobs, helping to boost economic activity.
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