Final answer:
Fiscal policy is the use of government spending and tax policy to influence the economy over time. It aims to manage the business cycle and maintain stability.
Step-by-step explanation:
Fiscal policy is the use of government spending and tax policy to influence the path of the economy over time. Graphically, we see that fiscal policy, whether through changes in spending or taxes, shifts the aggregate demand outward in the case of expansionary fiscal policy and inward in the case of contractionary fiscal policy. The goal of fiscal policy is to manage the business cycle so that the economy neither grows too fast nor shrinks too precipitously.