What is the purpose of Fiscal policy?

Question

What is the purpose of Fiscal policy?

Answer 1

Fiscal policy is how the government determines how it will tax the people and what it will spend that on. This process is known as budgeting.

The purpose is to benefit the economy as a whole.

*Note - this is not monetary policy, such as what the Federal Reserve does when it changes interest rates.

There are a few definitions of what benefit is and that is the crux of the problem.

Some who are fiscally conservative believe the government should tax and spend as little as possible because the extra government is a waste of money that could be in the whole economy. They're generally for less restrictions on business and they believe in tax cut and spending cuts (such as welfare reform of the 90's).

Fiscal liberals believe it is the government's job to level the playing field of the economy and provide "safety nets" (or temporary aid to people who have failed) so that everyone has a better chance of attaining a good standard of living. They are for more restrictions on business (such as Sarbanes-Oxley) and they think raising taxes can be justified if they are accompanied by government benefits which increase the standard of living for those at the middle and lower income levels.

Answer 2

To redistribute wealth from the more well off to the less well off and provide public services eg. Roads.