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13 May, 2015 - 10:20

Fiscal policy is the use of taxes and government spending to control the economic activity of a country. Such intent is explicitly stated in the Employment Act of 1946 and restated in the Humphrey-Hawkins Act of 1978.

In 1981, the tax changes voted by congress were given the name of Economic Recovery Tax Act. This clearly shows that the government uses taxes as a method of controlling the economy. Along with spending, tax changes are what fiscal policy is.