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A 'policy is a deliberate plan of action to guide decisions and achieve rational outcome(s). The term may apply to government, private sector organizations and groups, and individuals. Policy differs from rules or laws. While law can compel or prohibit behaviors (e.g. a law requiring the payment of taxes on income) policy merely guides actions toward those that are most likely to achieve a desired outcome.

Policy may also refer to the process of making important organizational decisions, including the identification of different alternatives such as programs or spending priorities, and choosing among them on the basis of the impact they will have. Policies can be understood as political, management, financial, and administrative mechanisms arranged to reach explicit goals.