Fiscal policy refers to the government's use of spending and taxation to influence the economy. By adjusting these financial tools, the government aims to promote economic growth, reduce unemployment, and control inflation. For example, increasing government spending can stimulate demand, while raising taxes can help cool down an overheated economy. Governments typically implement fiscal policy through budgets that outline their planned expenditures and revenue. This policy can be either expansionary, which involves increasing spending or cutting taxes, or contractionary, which involves decreasing spending or raising taxes. The goal is to achieve a stable and healthy economy.