Fiscal policy. Let's first take a look at the goals and the impact or the intended impact of fiscal policy. Fiscal policy is an attempt by the government to create a stable economic environment. Now that's very similar, actually just like monetary policy. The only difference is that the levers that the government pushes are different. Now, the goals of fiscal policy are to either accelerate growth of the economy when it starts to slow, and that's a pretty obvious one, but it's also there to moderate growth and steer the underlying economy so it doesn't experience a bubble or a boom that may be followed by extended periods of negative growth and high levels of unemployment. Now, why is a stable economy that's not volatile so important? Well, in a stable economic environment, households can feel secure in their spending, in their savings decisions. Also, corporations can concentrate on their capital expenditures and their investments in making their coupon payment to debt holders, and concentrate on making profits. Now, the key word here is attempt. Just like monetary policy, fiscal policy doesn't always work as intended, and there are plenty of examples in history where the government policies have exacerbated economic expansion and created a bubble unintentionally, or created an environment that elongated a recession, or the depression if we go way, way back. Now, unlike monetary policy, fiscal policy looks at the economy from a top down. So it uses macroeconomic insight and data points to make their investment decisions. And their specific goals are, and these goals will all contribute to a stable economy, are to manage demand by individuals and corporations. You know, distribute income and wealth among sectors, among individuals, and to allocate resources among sectors and industries to create a more equitable and robust economic environment. And just like monetary policy, these goals here are known to be conditions that support long-term economic growth of an economy. Now, as I mentioned, in a recession or a downturn, governments can implement expansionary fiscal policy in an attempt to raise an employment and raise personal incomes. And then in boom times, or potentially overheating times where the economy is at full employment and wages and prices are rising potentially too fast, the government can attempt to step on the brakes with physical policy and cool down the economy through what we call contractionary fiscal policy. Now we're gonna take a look at an example of expansionary fiscal policy, but the two levers that the government can push in fiscal policy are taxes and the amount of spending that they do. Now, in an expansionary policy, taxes will get cut, both income sales, capital gains, corporate taxes. And what this does is it raises disposable income for individuals with an objective to increase spending and aggregate demand. Lower corporate taxes, of course increase profits and increase the amount of funds available for CapEx or capital spending. Now, government spending is spending on infrastructure. So, spending on new public schools, on social goods, hospitals also, and this creates jobs, boosting incomes, and the objective is to accelerate the economy. And again, this is an example of expansionary policy and conversely, if we looked at contractionary fiscal policy, you see the reducing of expenditures and increasing taxes by the government. And this might reduce economic activity, so you can see how fiscal policy plays a very very important role in stabilizing the economy, both in good and bad times. Now, fiscal policy can't be looked at in a vacuum. You also needed to evaluate fiscal policy in the context of a budget surplus or a budget deficit. Now of course, cutting taxes and increasing spending is a rather easy lever to push. You do have constraints, budgetary constraints that could impact the economy also. And you also need to look at fiscal policy with any corresponding monetary policy that's being taken place at the same time. Now, the reliability and the magnitude of the relationships that we've discussed, you know tend to vary over time and from country to country. For example, in a recession with rising unemployment, it's not always the case that a cut in taxes will raise consumer spending. Consumers may wish to raise their safety net and a their rainy day fund in anticipation of, you know a further decline in the economy, and therefore fiscal policy would not equate to an increase in aggregate demand as intended.