Final answer:
Fiscal policy is the term used when the government changes taxation and sets government spending to influence the economy.
Step-by-step explanation:
The government changing levels of taxation and setting levels of government spending to have a desired effect on the economy is called fiscal policy. Fiscal policy is a set of policies that relate to federal government spending, taxation, and borrowing.
By increasing taxes, the government can reduce consumption and slow down economic growth when the economy is growing too quickly. On the other hand, decreasing taxes can promote economic growth by increasing consumption and investment spending.
Examples of fiscal policy include the tax policies of the Kennedy administration and the Reagan administration in the United States.