The article discusses how governments use fiscal policies like spending, taxes, and transfers to manage inflation and unemployment. These policies also address allocation, distribution, and public-choice needs. The impact of fiscal policies on the economy depends on the shape of the supply curve. Government investments boost both supply and demand, while some programs can hinder efficiency. Taxes vary in their effects and who pays them, with options like progressive, proportional, or regressive taxes. Tax expenditures are special breaks that encourage spending on government-approved programs. Each fiscal policy tool has pros and cons.