Fiscal policy plays a critical role in government regulation by influencing economic activity through taxation and spending decisions. By adjusting interest rates and modifying budget allocations, governments can promote economic growth, mitigate inflation, and reduce unemployment. Fiscal policy tools, such as stimulus packages and tax incentives, can direct resources toward public services, infrastructure projects, or social programs. Consequently, appropriate fiscal measures can help stabilize economies during downturns while also addressing long-term challenges such as inequality and sustainability, thus shaping overall economic health.