In 2003, Congress passed a substantial cut in income taxes. The Federal Reserve also lowered interest rates. How can these two actions be categorized?

Question

Quizplus · Accepted Answer

The tax cut passed by Congress is an example of fiscal policy because it involves changes in government spending and taxation. The decision by the Federal Reserve to lower interest rates is an example of monetary policy because it involves changes in the money supply and interest rate targets. Therefore, the tax cut can be categorized as fiscal policy and the lowering of interest rates can be categorized as monetary policy.

In 2003, Congress Passed a Substantial Cut in Income Taxes