fiscal policy, measures employed by governments to stabilize the economy, specifically by manipulating the levels and allocations of taxes

and government expenditures. Fiscal measures are frequently used in tandem with monetary policy to achieve certain goals. The usual goals of both fiscal and monetary policy are to achieve or maintain full employment, to achieve or maintain a high rate of economic growth, and to stabilize prices and wages. The establishment of these ends as proper goals of governmental economic policy and the development of tools with which to achieve them are products of the 20th century. Fiscal policy is the use of government spending and TAXATION to influence the economy. When the government decides on the goods and services it purchases, the transfer payments it distributes, or the taxes it collects, it is engaging in fiscal policy. The primary economic impact of any change in the government budget is felt by particular groupsa tax cut for families with children, for example, raises their disposable income. Discussions of fiscal policy, however, generally focus on the effect of changes in the government budget on the overall economy. Although changes in taxes or spending that are revenue neutral may be construed as fiscal policyand may affect the aggregate level of output by changing the incentives that firms or individuals facethe term fiscal policy is usually used to describe the effect on the aggregate economy of the overall levels of spending and taxation, and more particularly, the gap between them. Fiscal policy is said to be tight or contractionary when revenue is higher than spending (i.e., the government budget is in surplus) and loose or expansionary when spending is higher than revenue (i.e., the budget is in deficit). Often, the focus is not on the level of the deficit, but on the change in the deficit. Thus, a reduction of the deficit from $200 billion to $100 billion is said to be contractionary fiscal policy, even though the budget is still in deficit. monetary policy, measures employed by governments to influence economic activity, specifically by manipulating the supplies of money and credit and by altering rates of interest. The usual goals of monetary policy are to achieve or maintain full employment, to achieve or maintain a high rate of economic growth, and to stabilize prices and wages. Until the early 20th century, monetary policy was thought by most experts to be of little use in influencing the economy. Inflationary trends after World War II, however, caused governments to adopt measures that reduced inflation by restricting growth in the money supply.

monetary policy
Definition
The regulation of the money supply and interest rates by a central bank, such as the Federal Reserve Board in the U.S., in order to control inflation and stabilize currency. Monetary policy is one the two ways the government can impact the economy. By impacting the effective cost of money, the Federal Reserve can affect the amount of money that is spent by consumers and businesses.

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taxation
A means by which governments finance their expenditure by imposing charges on citizens and corporate entities. Governments use taxation to encourage or discourage certain economic decisions. For example, reduction in taxable personal (or household) income by the amount paid as interest on home mortgage loans results in greater construction activity, and generates more jobs. See also taxation principles.

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Definition of 'Taxation'
Taxation refers to the act of a taxing authority actually levying tax. Taxation as a term applies to all types of taxes, from income to gift to estate taxes. It is usually referred to as an act; any revenue collected is usually called "taxes."

What is Inflation?
Inflation is the percentage change in the value of the Wholesale Price Index (WPI) on a year-on year basis. Advertisement inflation ( n-fl sh n) (Bad banner? n. Please let us 1. The act of inflating or the state of being inflated. know) 2. A persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money, caused by an increase in available currency and credit beyond the proportion of available goods and services. The American Heritage Dictionary of the English Language, Fourth Edition copyright 2000 by Houghton Mifflin Company. Updated in 2009. Published by Houghton Mifflin Company. All rights reserved. inflation [nflen]

n 1. the act of inflating or state of being inflated 2. (Economics) Economics a progressive increase in the general level of prices brought about by an expansion in demand or the money supply (demand-pull inflation) or by autonomous increases in costs (cost-push inflation) Compare

Definition of 'Unemployment'
Unemployment occurs when a person who is actively searching for employment is unable to find work. Unemployment is often used as a measure of the health of the economy. The most frequently cited measure of unemployment is the unemployment rate. This is the number of unemployed persons divided by the number of people in the labor force. employment
/emploimnt/

Noun 1. The condition of having paid work. 2. A person's trade or profession.