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Fiscal Policy

A government’s fiscal policy is its set of principles for determining its public expenditures and its methods for funding those expenditures. Fiscal policy includes changing the amount of government spending or government revenues (by raising or lower taxes) to affect the economy. Fiscal policy and monetary policy are the two primary tools a government has to create changes in economic growth.

In the United States, fiscal policy is set through a collaborative process. Although the president proposes a budget, it is Congress that determines spending and sets tax regulations. The president may either sign or veto the proposed budget, but he or she cannot make specific changes.