Fiscal policy consists of government decisions to vary certain fiscal aggregate such as total government spending and total tax revenue as opposed to some other aspects of public finance which are primarily concerned with the effects of specific expenditure and taxes.
The objectives of fiscal policy include achieving: full employment, price stability, equitable distribution of income, external equilibrium, economic growth, and economic development.
Fiscal policy could be expansionary; it could be restrictive. An expansionary fiscal policy is characterized by an increase in real government like any other expenditure, government expenditure needs to be financed.
1. Timing problem has posed a serious threat to the use of fiscal policy.