What is a fiscal policy and how does it affect the economy?

Fiscal policy refers to the use of government spending and taxation to influence the economy. Governments adjust fiscal policy to stabilize the economy, manage inflation, and reduce unemployment. In times of economic downturn, governments may increase spending or reduce taxes to stimulate demand and foster economic growth. Conversely, during periods of inflation, they may raise taxes or reduce spending to cool down the economy. Fiscal policy is a powerful tool used by governments to manage economic cycles, and its effectiveness depends on factors such as consumer behavior, government debt, and external economic conditions.