Answer: Fiscal Policy
Explanation: Fiscal policy refers to the use of government spending and tax policies to influence economic conditions, including demand for goods and services, employment, inflation, and economic growth.
Fiscal policy is largely based on the ideas of British economist John Maynard Keynes (1883-1946), who argued that governments could stabilize the business cycle and regulate economic output by adjusting spending and tax policies. His theories were developed in response to the Great Depression, which defied classical economics' assumptions that economic swings were self-correcting. Keynes' ideas were highly influential and led to the New Deal in the U.S., which involved massive spending on public works projects and social welfare programs. The logic behind this approach is that when people pay lower taxes, they have more money to spend or invest, which fuels higher demand. That demand leads firms to hire more, decreasing unemployment, and to compete more fiercely for labor. In turn, this serves to raise wages and provide consumers with more income to spend and invest. It's a virtuous cycle.
Rather than lowering taxes, the government may seek economic expansion through increases in spending. By building more highways, for example, it could increase employment, pushing up demand and growth. Expansionary fiscal policy is usually characterized by deficit spending, when government expenditures exceed receipts from taxes and other sources. In practice, deficit spending tends to result from a combination of tax cuts and higher spending.