It is the government’s spending-and-tax toolkit, distinct from a central bank’s interest-rate dial.
01
Go deeper
Measures can support demand or restrain it. Their effects depend on timing, funding, household responses and economic capacity. Automatic changes, such as lower tax receipts during a downturn, also affect budgets.
02
Make it concrete
Hypothetical illustration. Hypothetically, a government funds repairs during a slump. The immediate purchases and wages may support demand, while the financing creates other trade-offs.
03
When you read a headline
A policy’s budget cost and its effect on GDP are different quantities.