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What is a fiscal policy

Fiscal policy is the use of government spending on goods and services to affect aggregate demand and to alter RGDP and the price level. There are two types of physical policy namely Expansionary fiscal policy and contractionary fiscal policy. Expansionary physical policy is associated with increased government budget deficit and contractionary fiscal policy tend to increase budget surplus.

How can it be used to get economy out of recession?

The government can bring the economy out of recession using expansionary fiscal policy. If the government decides to spend more or tax less, other things constant, total purchases will rise. This can in turn increase consumption, investment, and government purchases. This should increase the aggregate demand and have a multiplier effect. The multiplier effect is a chain reaction of additional income and purchases that results in a final increase in total purchases that is greater than initial increase in purchases.

How can it be used to get the economy out of the situation in an expansionary period where we exceed long run potential

In an expansionary period, price level rises and it can lead to inflationary gap. A change in fiscal policy may help "cool off" the economy when it is overheated and inflation has become a serious problem. Government uses contractionary fiscal policy to offset an overheated, inflationary boom. This means tax increase on consumers which will reduce household's disposable incomes, thus reducing purchases of consumption goods and services, and higher business taxes will reduce investment purchases.

Do both situations result on different impacts on inflation? Why or Why not?

Yes. Contractionary fiscal policy would reduce inflation whereas expansionary fiscal policy would increase inflation. The aggregate demand and price levels move in different directions in recessions and inflationary periods. If the government during inflation were to spend again or lower taxes, this could result in even higher inflation and result in overheated market economy.