Explanation

Fiscal policy uses government spending and taxation to influence the economy. Expansionary policy (increase spending, cut taxes) stimulates growth during recession. Contractionary policy (opposite) cools overheating economy.

Government spending injects money into economy; taxation removes money. Budget deficit (spending exceeds revenue) is expansionary; surplus is contractionary. Nigeria often runs deficits.

Differs from monetary policy (controlled by Central Bank through interest rates and money supply). Both tools work together. Fiscal policy is political – governments face pressure to spend more than they tax.