A countercyclical fiscal policy is conducted by ________ by acting to change ________.
A) the government; taxes and interest rates
B) the central bank; interest rates and taxes
C) the government; taxes and government expenditures
D) the government; government expenditures and interest rates

Question

Quizplus · Accepted Answer

Countercyclical fiscal policy is conducted by the government, and involves changing taxes and government expenditures in response to changes in the business cycle. Option C is the only choice that accurately reflects this definition. Option A is incorrect because the central bank is responsible for conducting countercyclical monetary policy, not fiscal policy. Option B is also incorrect because the central bank does not have the power to change taxes, only interest rates. Option D is partially correct, as it includes government expenditures, but it also includes interest rates, which are not part of fiscal policy.

A Countercyclical Fiscal Policy Is Conducted by ________ by Acting