Fiscal policy refers to the use of government spending and taxation to influence economic activity. It is an important tool for governments to promote economic growth and stability by influencing the level of aggregate demand in the economy. Fiscal policy can be used to encourage investment, control inflation and reduce inequality. It is used to encourage investments in certain industries and to assist in times of economic crisis. Fiscal policy also plays a role in achieving fiscal sustainability, which allows governments to meet their current spending commitments and budget goals.