The Federal Government policy that influences the business cycle fluctuations by taking action on taxes, spending, and borrowing is Fiscal Policy.
Fiscal policy refers to the use of government spending and tax policies to impact economic conditions, primarily macroeconomic conditions. These comprise aggregate demand for goods and services, employment, inflation, and economic development.
Fiscal policy is often discerned with monetary policy, which is enacted by central bankers and not elected government officials. This is mainly based on ideas from British economist John Maynard Keynes.
U.S. fiscal policy is largely based on the ideas of John Maynard Keynes. His theories were formulated in response to the Great Depression.
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