Fiscal policy significantly impacts economic stability by guiding government spending and taxation decisions. Through expansionary fiscal policies, such as increased government expenditures and tax cuts, policymakers can stimulate economic growth, especially during recessions. Conversely, contractionary policies may be employed to curb inflation and stabilize the economy. The effectiveness of fiscal policy depends on timely and targeted interventions, as mismanagement can lead to adverse effects like increased debt or inflation. Overall, fiscal policy serves as a crucial tool for governments to promote economic stability and influence macroeconomic conditions within their jurisdictions.