Explain the concept of Fiscal Policy?

In macroeconomics, fiscal policy refers to the efforts by the government to use taxes and government spending to ensure the smooth running of the macroeconomy.  That is, the government uses these tools to try to prevent high unemployment and high inflation.

If the economy faces a recession, the government is supposed to cut taxes and increase spending.  When it does this, people have more money and can buy more goods and services.  This will lead to more jobs for people who make those goods and services.

By contrast, if the government fears inflation, it is supposed to raise taxes and cut spending.  This decreases the amount of disposable income that people have and so they spend less and prices do not rise.