Which policy involves deliberate government action to influence the economy through changes in spending or taxation?

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Deliberate government action to influence the economy through changes in spending or taxation is fiscal policy. By adjusting government purchases and tax rates, the government shifts overall demand in the economy. When activity is weak, expansionary fiscal policy—spending more or cutting taxes—increases aggregate demand and stimulates growth. When inflation or overheating is a risk, contractionary fiscal policy—spending less or raising taxes—helps cool demand.

This differs from monetary policy, which uses tools like interest rates and money supply controlled by the central bank to influence the economy. It also differs from supply-side policy, which aims to boost the economy’s productive capacity through reforms and incentives rather than short-run demand management. Industrial policy targets specific sectors rather than broad fiscal levers.

So the described approach fits fiscal policy.